Managing day trading risk: Pro tips on building and exiting positions

Going “all in” may sound appealing if you’re talking about high-stakes poker or other casino games, but when it comes to day trading strategy, it may not be advisable for every individual. When it comes to minimizing risk, managing positions—or how a trader builds and exits a position—is essential for any successful trader.

Enter Symax General Trading Director of Trading and Education Chris Tubby. In his recent webinar, “Building and Exiting Positions,” Tubby laid out the characteristics of a trade build and exit.

“Most trades go against you before they turn in your favor, if they turn in your favor at all,” Tubby said.

To address this, Tubby recommends traders break their orders down into three parts. This allows traders to attempt to gain the best average possible with the option to scale into the most favorable positions. “The middle price is going to be my average, so I scale into that position,” he said.

First, identify where your support and resistance lines are. Then, calculate how you wish to enter your trade from a well-planned approach with your stop loss in place and you’ll know exactly how much it will cost you.

“For me, when I look at risk versus reward, I look at it as a two to one,” Tubby said.

He added that it’s different for everybody, but with a 2:1 approach, even if you’re only right half the time, you’ll still end up with something in your account. Nobody gets every trade right and some get stopped out, but accepting that and preparing accordingly will minimize loss and risk.

Stop loss as the cost of doing business in day trading

“Think of it as the cost of doing business [when stopped out],” Tubby said. “I reduce my risk. I take away the risk that can destroy my capital.”

Tubby concluded that it’s important to not chase the market. When taking on high-probability trades, traders can reduce their risk as much as possible by taking the market in piecemeal, giving them the opportunity to get a stronger average.

To learn more about Tubby’s trading philosophies, as well as an in-depth look at exiting positions, view the full webinar here.

Interested in more futures trading tips? Explore NinjaTrader’s on-demand video education library, with new events added weekly. Check out our schedule of upcoming webinars and register to attend live events.