Once read this, you will never forget it. Maybe it will change your way of trading for ever.
Quite some years ago I was working with two trading masters from US and France. Both have been trading for many years and one of them left his Forex trading desk at a US bank to become independent. They showed me a secret trade management strategy, that I have never seen anywhere else.
I would like to share this with you since I think it is so massive, that if applied well, it can make you a never loosing trader.
Part 1: Overall Perspective
The most important aspect of trade management is that, you need to have something to manage. If you set a fixed stop loss and your prop firm requires from you to use same lot sizes every time, I would stop here. For me, such restrictions are too tight.
So we use trade management when we DO NOT HAVE fixed StopLoss levels, defined at the time when a new position is opened. We manage the trade while the market reveals its behaviour.
Part 2: Grid Positions
Let's consider a grid entry strategy. We open the initial Sell-Entry and place several Sell-Limit orders #1, #2, ... #8 above the current price. Each Sell-Limit order has a larger size than the previous one. Because of this, we can catch profits quite easily every time the price movement reverts. And it does 99% of the time before 6 Limit orders are triggered. Of course we can use large distance between the orders but I want to make a point with this.
The main risk here is that if some news comes out the price simply does not stop moving. In that case, a naive grid strategy would have opened many, many, many positions.
Part 3: Washing the Trade
At some point we might realize, that the trade goes south and the loss increases without the price to revert to our full profit. What to do? Then we need to clean the mess up. An we call the ...
What we basically do now is to get rid of our initial expectation to close all position at once in profit. We basically now allow the trade to take longer instead of having higher lot sizes. The risk is magically transferred from lots to time. 🤓
The inner working process is like this:
So we close the most recent positions with overall profit and remove the major chunk of the lots from the margin.
Now, one might argue that if we would have waited little bit longer, then we would have been able to close all positions at once.
But let's make it clear: Cleaning and Washing is no fun. We do it because we prefer to reduce the risk. And we do not give up the overall profit for all trades. We postpone it.
Part 4: Post Washing
What happens after we close 3 of 5 positions? Well, we wait.
We have now two possible development options
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The price falls down and we can close positions #1 and #2 with profit.
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The price continues rising.
The first case is trivial.
Let's have a look at the second case: When the price reaches again the entry level of #5, which is closed now, we can trigger #3 again with its corresponding lot size. If the price moves higher, we continue with #4. If the price continues to rise, we continue with #5. You get the idea.
As before, as soon as we see last 3 positions in profit, we wash/close them. We can of course close the remaining positions as soon as their drawdown is smaller than the sum of washed profits.
Generally speaking, we continue washing and cleaning until all the trades are clean.
See it in action
I hope you like this article and see how powerful the cleaning strategy can be. You can vary many aspects such as entry patterns (not just grid), amount of washed positions and at what drawdown you like to close remaining positions after booking profits with washing trades.
The power of the cleaner comes unfortunatelly along with much higher management effort compared to a setting-and-forget fixed SL. Consider using the Expert Advisor BFG9000, which got the Cleaner implemented.
You can see it in action here:
You can start right today with the ready to use implementation of the Cleaner.
Discover how your trading can benefit and subscribe to BFG9000.
