How do people take profits?

hi,

ive been trading live for very small profits and i believe my risk and trade management are ok. however, i always encounter a stumbling block that i was wondering if anyone has any thoughts on?

situation: you find yourself in a winning trade, the forex pair then sharply moves in your direction. when do you take profits? what do you use to indicator a reversal from a sharp move your way?

i would normally use a cancel and replace stop management for normal trending markets, but when i trade trendline breaks, and the move is sharp, i never know where to cancel and replace to lock in profits since it hasnt retraced to any sup/res level.

i hope that it is clear, just wanted to know what people generally do in this scenario to maximise profits as often i have found myself seeing the sharp move retrace sharply back and eventually my winnings go "puff".

any thoughts appreciated.

There's no correct answer really. I suggest trial and error. Take note of what you did and why, over a significant period, see what works and what doesn't. Everyone's trading is unique.

thanks hotch for your response, u diamond geezer!

only thing is, atm my trial and error involve keeping my greed at bay but unfortunately, all too often i see my profits vanish due to leaving it too late

i appreciate that everyone's trading is unique to them, its just that it bugs me but thanks for the advice regarding making notes on trades, i think i may have found something that i could use!

if theres anyone that could add to this Q, i'd be all ears (eyes)

I agree with Hotch, there's no simple answer depending on your trading but it's a good idea to keep a few things in mind. You mention "sharply in your direction" which I'm guessing you mean a spike of some sort over 1 or 2 candles. It helps if you know what might have made that happen. For example if Obama, Bernanke, Trichet, Merkel, or any of a handful of others other are speaking, you will get all kinds of whipsaw action. In that case I'd take profits quickly if you get a nice sharp move in your favor. If price continues to move on, oh well, you have your profits so be happy. If price retraces you may be able to get another entry.

I just said this on an other thread but it good to repeat: Remember, you cannot and will not get every pip out of any moves so just attempt to get as many as you can while losing as few as you can.

Peter

thanks wackypete, your advise is wikid!

the sharp move in my direction didnt come with any major announcements but purely breaking of key sup/res levels or breaks of major trend lines. my rule is not to trade around news but i'll keep my eye on bloomberg for any speeches by euro/usa figureheads.

i learnt about fibonnacci retracement/extensions last night and it may come in handy for identifying reversals or pos s/r lvls, what you reckon?

I take my profits when the price hits a S/R level whilst around halfway to it, the stoploss gets moved to break even - should there be a sudden spike of nastyness, or if the price looks like its going to reverse, ie; stopped moving in my direction and is stalling, the trade gets closed.

gdr3k said:

I take my profits when the price hits a S/R level whilst around halfway to it, the stoploss gets moved to break even - should there be a sudden spike of nastyness, or if the price looks like its going to reverse, ie; stopped moving in my direction and is stalling, the trade gets closed.

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i feel priviledged to have your first post in this thread, gdr3k, lol!

when i initially traded i thought a move to breakeven after next s/r lvl reached would be a good thing, however, i've replaced that logic with a "cancel and replace" technique as i feel that it represents a better way to run profits whilst minimising risk without prematurely moving stop to b/e and i find that this technique works well in a normal trending mkt.

a cancel and replace doesnt work so well in this particular situation as what im talking about is something like the chart attached to this post.

this is a chart of the eurusd today and you can see a massive sell off on it. if you were trading a trendbreak there, you would have a situation where you would be in profit but there isnt any visible retracement levels to do a cancel and replace to lock in profits so your pretty much left with guessing when the selling pressure bottoms out.

That chart you posted, those 3 tops before the drop off, I traded the ups and downs of those and on the 5th movement 'down' one was the big drop which broke though the support, I closed the last sell at 1.44096 which was the close of the first green candle below the support which it has just broke through. A nice 150+ pips today.

Edit - I traded the 4 tops before the drop however the very first one I closed for a 3 pip or so profit so I never mentioned it in the original post before this edit, opened @ 1.44588 and closed at 1.44556.

gdr3k said:

That chart you posted, those 3 tops before the drop off, I traded the ups and downs of those and on the 5th movement 'down' one was the big drop which broke though the support, I closed the last sell at 1.44096 which was the close of the first green candle below the support which it has just broke through. A nice 150+ pips today.

Edit - I traded the 4 tops before the drop however the very first one I closed for a 3 pip or so profit so I never mentioned it in the original post before this edit, opened @ 1.44588 and closed at 1.44556.

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thats a great result

so your strategy doesnt have a bias>? you simply trade the trends and counter trends throughout? with my "strategy" im only trading trendline breaks but the strategy is early doors so it will change as i pick up new stuff.

so after that big drop, am i correct in saying that you take profit at the first closed green candle that shows?

Hi munchiedude - Going back to your original question, I will say in order to make more profits you don't have to score more pips. You do need to know how many pips you are most likely to score and how often per every 100 trades of that type, then you just ramp up the stake accordingly, though always remembering not to risk more than 2% of your account per trade.

Chasing pips is not an objective, we are trying to a) not get knocked out, and b) make money (pips cannot be spent on food or bills).

dany123 said:

Hi,
There is a high potential of profit with adequate risk rate. High profit potential means from 100% to 300% annually. Interesting, isn’t it? Unfortunately, nothing‘s perfect. In this case it is a possibility of loss. If you are interested in profit as high as possible, we need you to be tolerant and accept short lasting 25% draw down.plz. keep commenting.

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hi dany123, apologies but i've read your post twice and cannot understand its meaning or relevance to the thread? pls elaborate, but thanks for posting!

hi tomorton,

thanks for your reply. whilst i appreciate the scalability of lots, i.e.£1/pt, £100/pt etc, i would say that monetary profit is not as important as scoring pips at this stage of my learning and also for future trading.


the reasoning behind it is this: lets say i end up being a consistently profitable trader, i would rather consistently score 30-100pips/day than to consistently score 5-10pips/day as i believe it would then factor in the market fluctuations and even things out. the £/pip value is irrelevant. i could do this with any value if i am consistently profitable.

the question is, if i wanted to make £500/day, would i rather do it by looking for 5pips at £100/pip or 50 pips at £10/pip? i would choose the later as i can make more trades and work on the longer term law of averages rather than make 1/2 trades and then be done for the day. i personally believe that not every trade will be a winner and thus allowing more trades to carve out an edge is better?

this is an open topic and some may disagree with the logic, i would welcome and argument for an against it but its just my line of thinking and it may/may not be correct, but i deem it sensible.

feel free to comment

I don't think we're on the same wavelength here though each is entitled to their own approach, but I have to point out the errors in logic - more trades per year does not mean a better win rate and trading for more pips at lower stake does not mean lower risk.

tomorton said:

I don't think we're on the same wavelength here though each is entitled to their own approach, but I have to point out the errors in logic - more trades per year does not mean a better win rate and trading for more pips at lower stake does not mean lower risk.

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yeah i figured we might not be on the same wavelength lol!

i agree that more trades doesnt mean a better win rate, but i think the point i was trying to make is that the value of the stake is irrelevant as it is scalable. based on keeping the lot sizes and stake the same, every pip = profit since its £/pip, the more pips the better but i think that you are talking about changing the £/pip therefore its different as im stating on the basis of 1 lot size and fixed £/pip.

munchiedude said:

when i initially traded i thought a move to breakeven after next s/r lvl reached would be a good thing, however, i've replaced that logic with a "cancel and replace" technique as i feel that it represents a better way to run profits whilst minimising risk without prematurely moving stop to b/e and i find that this technique works well in a normal trending mkt.

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Hi Mr Munchie Dude, I am not really following what you mean by your "cancel and replace technique" can you explain?

Jason101 said:

Hi Mr Munchie Dude, I am not really following what you mean by your "cancel and replace technique" can you explain?

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I think he means a trailing stop - cancel the old one, and replace it with a more favourable one.

yea farquinnell is kinda correct, i will post a chart tomorrow to perhaps explain it clearer. i have to clarify that im a newbie trader but this technique helps me maximise profits.

unlike a trailing stop, it doesnt follow the price by a set number of pips, instead, once the price makes a higher high, then the stop loss can be moved to the next higher low thus it will always be at the last sup lvl assuming that were going long. its basically a chasing stop loss always at sup level and applied only when a new higher higher is made.

for the record, I think exits are much harder to handle than entries, for a host of reasons.

record noted i totally agree cos i think the emotion of greed has a powerful association with the exit whereas the entry is geneally emotionless

FarQuinnell said:

for the record, I think exits are much harder to handle than entries, for a host of reasons.

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No matter how hard you try or how long you've been trading you will never master exits! It's the ultimate riddle, wrapped in a mystery, inside an enigma.

Peter

don't misunderstand me, they're both as important as each other - and of course emotions are a contributory factor, but as an exercise try the following:

* Pick your exit, then decide where is the best entry (first, give yourself longs and shorts, ut then specify)

* Enter with unlimited stop, but try to pick your exit

too many times people think that a good entry and sound money management is all they need - and put down all failures to poor entries, rather than average entries but dreadful exits. But often I have found that people will look for a profitable entry, and then optimise their exit, rather than the reverse, or - heaven forbid - an aggregation of the two...