Trade Management Systems: Comparing Two Methods

📌 Method 1 – Normal SL & TP

Entry → Open trade at ENTRY.

Stop Loss (SL) → Fixed (below ENTRY for buy / above ENTRY for sell).

Take Profits (TP1 & TP2) → Both active.

When TP1 is hit → Book partial position.

SL stays the same → risk remains on the rest of the trade.

✅ Advantage:

More potential profit if market extends to TP2.

❌ Risk:

If price reverses after TP1, the remaining position can still hit SL → reducing overall profit.

📌 Method 2 – Breakeven Stop (SL = ENTRY after TP1)

Entry → Open trade at ENTRY.

SL initially fixed.

When TP1 is hit → Book 50% profit, then move SL to ENTRY (breakeven).

Remaining position:

If TP2 is hit → book extra profit.

If price falls back → exit at ENTRY (no loss).

✅ Advantage:

Trade becomes risk-free after TP1.

❌ Risk:

Sometimes market hits TP1 then pulls back, causing breakeven exit → missing bigger gains compared to Method 1.

📌 Enhanced System (Your Version with Fixed Risk)

Initial SL → Always set at 2R.

TP1 → When reached, book 50% profit (+1R on half).

Then move SL to ENTRY (breakeven) for the remaining 50%.

📊 Possible Outcomes:

Scenario Result
Price hits SL (before TP1) –2R loss
Price hits TP1, then reverses to ENTRY +0.5R profit
Price hits TP1, then TP2 +2R total profit
⚖️ Summary

Method 1 (Normal SL & TP) → More profit potential, but carries more risk on the remaining position.

Method 2 (SL = ENTRY after TP1) → Safer, risk-free after TP1, but sometimes cuts off bigger gains.

Your Enhanced Version → A defensive system:

Losers are limited (–2R).

Small winners (+0.5R) happen often.

Big winners (+2R) balance out losses.

💡 With consistent discipline, even a 40–45% win rate can make this system profitable.