Vantage FX (http://www.vantagefx.co.uk) look at risk-management techniques when trading.
Risk Management -- Identifying Trades
We look at a chart formation that is trading in a very clear trend, supported by the relevant moving averages. In this chart, a sell opportunity appears at the top of the trend, where recent economic data has failed to push the price through the upper level.
As a risk management strategy, a trader could employ a tight stop loss level. The stop is based on an understanding of the 'normal movement' in the asset. As the DJ could move several pips without signifying a definite move, the trader places a stop approximately 100 points away.
Traders can refer to shorter-term candles or shorter-term indicators, such as the 10-day moving average, to give a more precise price action. Using this shorter time-frame, you could enter a smaller position and then add to it if the market movement suggests that there will be a move to their downside.
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