Learn about the managed stop loss and managed take profit, phases, next phase event, and move to phase event
The manage stage deals with the setting and management of stop loss and take profit targets, both to protect your capital and to increase the efficiency of your trading system.

The first and foremost rule of trading is to preserve capital and its main goal is to increase it.

Conceptually, a position is not an instantaneous event, but an event which has an opening, a period of maturation, and a closing. The management of the position happens throughout the process.

The concept of managing the position refers to the fact that the formulas that determine the take profit and stop loss targets may change as the position develops. A typical situation in which you may want to change your original take profit and stop loss formulas is when the position seems to be developing well in your favor.

It may be in your best interest to manage the stop loss, moving the target in the direction that would help protect unrealized profits. It may also be in your interest to move the take profit target to extract a larger profit than originally expected. Or you may wish to set up a mechanism that closes the trade as soon as a certain market situation materializes.

The management of take profit and stop loss is done independently of each other, in phases. Therefore, each concept has its own set of management phases.

Each phase has its formula to describe the corresponding target. Users may define situations in which the current phase shall be abandoned and a different phase—with its formula—shall be implemented.

Keep in mind that the position is in constant development, so there may be as many phases as you deem appropriate for your particular strategy.

The idea of managing targets in phases derives from the notion that big market moves tend to provide clues as to what may come up next. For instance, rallies may accelerate as more traders join the move. Recognizable patterns may emerge. Signs of exhaustion may be identified.

All of these considerations may feed the dynamic analysis performed in each phase as the position develops.

Upon execution, the system verifies if the current candle has tagged either of the targets. If—or when—it does, the close stage kicks in and closing execution begins.

It is crucial to understand that Superalgos does not place orders to close a position until the stop loss or take profit targets are hit. That is, stop loss and take profit are not orders sitting at the exchange waiting to be filled at a certain rate. Instead, Superalgos keeps track of targets internally, and places the orders at the exchange during the execution cycle in which it detects either of the targets has been hit.

This behavior has advantages and disadvantages, but it was designed as is because the former outweigh the latter.

By not placing stop or take profit orders at the exchange, Superalgos keeps your targets—and the underlying strategy—secret. This guarantees that such a crucial piece of information may not be used against you by the exchange itself or any third party that may have access to privileged information.

On the other hand, not placing a stop order in advance may occasionally cause relatively more slippage, for instance, in cases of massive flash market moves.

That said, the default behavior of the system may be hacked to avoid the eventual risk of excessive slippage: set your stop loss and take profit targets tighter than intended.

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Adding the Manage Stage Node

To add a manage stage node, select Add Missing Stages on the strategy node menu. All stages that may be missing are created along with the rest of the basic structure of nodes required to define each of them and their events.


Manage Stage

Managed Stop Loss

Phase

Formula

Next Phase Event

Move to Phase Event

Managed Take Profit

Phase

Formula

Next Phase Event

Move to Phase Event

Managed Stop Loss

The managed stop loss node features the definition of the phases that make up the management of the stop loss target as the position develops.

A stop loss target is a crucial element of a trading strategy, as it is the device in charge of preserving capital. Used wisely, the management of the stop loss may also play the role of protecting unrealized profits.

The system for managing the stop loss provided by Superalgos is highly flexible. It may start as simple as a constant value at a certain rate, but may switch to a trailing stop as soon as the price moves away from the target rate by a certain percentage, or when a certain market situation arises.

In fact, the formula may change as many times as required, as you may set up unlimited phases, and switch back and forth as required using predefined events to make the switch.

Managed Take Profit

The managed take profit node features the definition of the phases that make up the management of the take profit target as the position develops.

A take profit target bears an important role in your strategy, as it plays a crucial role in determining the risk/reward ratio of the trading opportunity that materialized, and upon which your strategy acted to take a position.

The foremost goal of trading is to increase your capital, and how you set your initial take profit target and manage it afterward determines how much you may increase your capital given a favorable price action.

Phase

The management of take profit and stop loss targets is done in phases. Phase 1 sets the initial targets, either for the managed stop loss or the managed take profit, and becomes active as soon as the first order is placed. Subsequent phases allows switching to different formulas given certain market situations.

The default management of phases is sequential, meaning that phase 2 comes after phase 1, phase 3 comes after phase 2, and so on.

To switch from one phase to the next phase in the sequence, the next phase event is used. When the situation described in the next phase event validates true, the switch occurs and the next phase becomes the active phase.

However, management does not need to happen sequentially. By using the move to phase event instead of the next phase event, the system may activate any other phase and not just the one next in the sequence.

Both events may be used at the same time, and whichever event is triggered first takes precedence.

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Adding a Phase Node

To add a new phase, select Add Phase on the stop or take-profit node menu. A new phase is added along with the basic structure of nodes required to define each of them and their events.

Next Phase Event
The next phase event determines when there should be a switch of phases to the next phase in a predefined sequence.

The management of a position is —by default—done in sequential phases, each phase with its formula. To move from one phase to the next, a situation you define must be validated.

When that happens, the next phase event is triggered, the current phase is abandoned, and the next phase is activated. From that instant on, the system evaluates the formula corresponding to the next phase.

The sequence of phases may be as long as the number of phases you choose to add and define. There may be unlimited numbers of phases.

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Adding a Next Phase Event Node

To add a next phase event, select Add Next Phase Event on the corresponding phase node menu. The event is added along with the basic structure of nodes to define it.

Move to Phase Event
The move to phase event determines when there should be a switch of phases from the current phase to an arbitrary phase determined by a reference.

While phases are defined in a sequence and you may choose to manage the position by shifting from one phase to the next in the sequence, the move to phase event offers an alternative.

With the move to phase event, you may arbitrarily decide which will be the next phase. To do that, you must establish a reference from the move to phase event, to the phase that should be activated once the event is triggered.

Any number of move-to-phase events may be set up for each and every phase, allowing complete flexibility on how the position is managed. This feature allows setting up versatile position-management algorithms that may switch to different formulas back and forth, or in any configuration imaginable.

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Adding a Move to Phase Event Node

To add a move-to-phase event, select Add Move to Phase Event on the corresponding phase node menu. The event is added along with the basic structure of nodes to define it.