In the first article of this series, I showed you how to maximize your chance of profiting from trading major news reports while limiting your downside and removing the emotions from your trades. The second article outlined the two main dangers of this strategy. The third article showed you some basic money management tactics to adjust the maximum risk to your personal tolerance level. If you missed these articles, click here to read them now. Adjusted Stop Loss We can reduce risk further by setting an adjusted stop loss once the positive leg of the trade has reached a certain point. We have set this point at 28 pips. So, on the way toward the profit target of 45 pips, if at any point, the price goes +28, we move the stop loss from -25 to our entry point. This makes the max loss on that side 0 while the max loss on the losing side remains at -25 for a total loss of 25 pips instead of 50 pips, thus reducing our risk by half. Example: Short EUR/USD @ 1.2876
Long EUR/USD @ 1.2876 The EUR/USD short goes against us and stops out at a loss of -25 pips. The long goes in our favor and is +32 pips (> 28 Pips), our stop loss automatically moves from 1.2851 (-25 pips) to 1.2876 (entry price). If the price of the EUR/USD continues to go in our favor on the long position and hits our profit target of +45 then we will have a net profit of +20 pips. If price reverses and goes back down to 1.2876, then we will be stopped out at even on the long position and have a total net loss of -25 pips (from the stopped out EUR/USD short) and thus half of the normal max loss. The disadvantage to this strategy is that if price reverses temporarily and stops us out at the adjusted stop loss (entry price) and then eventually goes in our favor once again and ends up hitting the profit target of +45, then we missed an opportunity to take our net profit of +20. However, especially for those averse to risk, we suggest using the adjusted stop loss when trading this strategy. Based on percentages, the number of times that price will stop out at the adjusted stop loss and then continue to our profit target is very low, which makes it worth avoiding the 50 pip loss. Risk/Reward Scenarios w/Adjusted Stop Loss Applied 10/25 PLAN $10,000 standard (100K) account (10% profit, 12.5% risk) Max Deal: 1,000,000 (10 lots) Max Gain: $1,000 (5 lots per side x 20 pip profit x $10 per pip) Max Loss: $1,250 (5 lots per side x 25 pip loss x $10 per pip)
8/20 PLAN
$10,000 standard (100K) account (8% profit, 10% risk) Max Deal: 800,000 (8 lots) Max Gain: $800 (4 lots per side x 20 pips profit x $10 per pip) Max Loss: $1,000 (4 lots per side x 25 pip loss x $10 per pip)
6/15 PLAN
$10,000 standard (100K) account (6% profit, 7.5% risk) Max Deal: 600,000 (6 lots) Max Gain: $600 (3 lots per side x 20 pips profit x $10 per pip) Max Loss: $750 (3 lots per side x 25 pip loss x $10 per pip)
4/10 PLAN
$10,000 standard (100K) account (4% profit, 5% risk) Max Deal: 400,000 (4 lots) Max Gain: $400 (2 lots per side x 20 pips profit x $10 per pip) Max Loss: $500 (2 lots per side x 25 pip loss x $10 per pip)
2/5 PLAN $10,000 standard (100K) account (2% profit, 2.5% risk) Max Deal: 200,000 (2 lots) Max Gain: $200 (1 lots per side x 20 pips profit x $10 per pip) Max Loss: $250 (1 lots per side x 25 pip loss x $10 per pip)
As you can see, the adjusted stop loss brings the risk significantly closer in line with the profit potential.
(To be continued) In the next section, we will discuss trading strategies for after the news. DC Bonta has been amongst the most elite traders on the New York and American Stock Exchanges and has traded equities, options and Forex with firms such as Morgan Stanley and TD Waterhouse. His Forex trading strategies are available daily for Free on http://getresponse.com/t/9315655/577168/160336538/ Here’s To Your FX Trading Success,  DC Bonta, The world’s #1 FX money manager | 
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