Profit taking (exit strategy)

grubs50

Well-known member
408 0
I always seem to exit (a trade) too early or too late which ends up with me making far less points than was possible in most of my trades so i'm just wondering if anyone out there can give me some advice on how to maximise my profit. How do you decide when to exit? , do u exit after reaching your minimum target or have a particular formula...............I am not a daytrader and i SB only Dow and FTSE futures.........I am looking forward to your diferent views and suggestions, thanks
 

madasafish

Well-known member
470 5
Unless the move is very violent, I always exit at KEY s/R such as pivots.. and wait for the retracement..

If I'm wrong I will re-enter trade.

Once a market starts moving towards one Pivot/S/R it usually keeps going till it hits it...
 

jpwone

Well-known member
254 3
'Arll ave arf'

Close half at initial target and run balance.

Then

If it pulls back to original target then close the balance.
Or
If it carries on in profit direction run a trailing stop.
 

zow

Active member
136 0
I'm wiv' JPWONE.

Scale in ...... scale out.

Can be mathematically proven to give most profit in the long run. (don't ask me to prove it though - I read it somewhere!)
 

FTSE Beater

Experienced member
1,518 4
Hi Grubs50

I agree with JPWone :)

You have to be careful. If you are looking to get out at the best possible price, then your setting yourself a very tough goal.
The best thing to do is exit half of your position as you have been doing and let the other half run. If it goes against you more then get out of the remainder. If it goes in your favour then you have already taken some profit and anything after that is a bonus :)

HTH

<hr>
Hi Zow

I didn't realise it had been mathematically proven. I've always seen it as more of a psychologically enhancing technique than the most profitable :confused:
It would be interesting to read the research on that :)
 

grubs50

Well-known member
408 0
so I should lock in profits at half of my target and wait to c how things progress from there? just trying to understand your advice jpwone and Ftsebeater
 

Finlayson

Well-known member
410 10
Grubs

the scaling sounds like good advice, I think it also pays to have a good understanding of the instrument u r trading, ranges, exhaustion, zones etc & try to understand what the possibilities could be on any given trade.

e.g I trade the DAX & 3 is a magic number so I always have 30 as my initial planned exit but also protect profits on the way, but this can be extended if I think the market is likely to go to its exhaustion point after a range bound period

hope this helps as I know personally how difficult this can be

Jay
 

grubs50

Well-known member
408 0
So Finlayson what happens if u don't hit 30 points and the tide starts turning gradually against u, do u wait and hope or just exit your position or just go for a lower target?
 

Finlayson

Well-known member
410 10
Grubs

once I have a certain amount of profit I then have a trailing stop & chase it to its exit keeping a set distance, for example in a trade yesterday I was taken out before reaching my exit because of the volatility, so I was taken out at + 15 & then the market carried on to go to my exit.

happy with 15 points , there was no guarentee it would get to the 30 & the large retrace which hit the stop was because the market was so volatile as this is usually wide enough for an average market retrace , the market dropped through the target 10 or so points & then turned so would have been a nice 30 had it not been so volatile.

some people may not agree, the market could have flown past the exit & carried on, but there was nothing indicating a good chance of this so go for 30 & leave a bit for the next man.

Jay
 

zow

Active member
136 0
Well it depends....(doesn't everything?)......just closing out half the position at half the target, or whatever, is a bit crude and rigid.
Personally I like to keep a flexible approach so depending on the overall position size and how you see the market as it approaches the target price you may decide to cut some/all of the position there, or move up/down your target, or take a bit of a flier with the last 10% of the position, etc.

My general philosophy is that there is little point in having ONE single unique price that you decide to buy/sell at. If you do, are you not in effect claiming that that price is the highest/lowest that will be achieved in that move? e.g. The market is at 50 and you decide you want to sell if it hits 60 so you put in an order to sell your whole position at 60. But isn't there are very good chance it could go to 61, 62,...65 before it plummets to 10 as you predict? Even worse it just touches 59 and you don't get filled before it plummets to 10. (and of course it works exactly the same when exiting a position) In this example I would perhaps sell some at 55, some at 58, 60, 62 and 65. Obviously if you are trading one lot that's pretty impossible.

FTSE B
I can't quote or even point you towards the mathematical proof but intuitively it does make a lot of sense, doesn't it? How many times has the market missed your target by just a tick or two, then gone on to move in the way you predicted without you 'on board'.? Or it just misses your profit target by a tick and instead of a healthy profit you are out for flat (or even a small loss).

So it is psychologically enhancing as well as profit maximising.
 

FTSE Beater

Experienced member
1,518 4
grubs50 said:
so I should lock in profits at half of my target and wait to c how things progress from there? just trying to understand your advice jpwone and Ftsebeater
Hi Grubs

I'm sorry I didn't make it clear :eek:
Say your trading 2 contracts. Buy in at 100. Price moves up to 105 and this is where you would have exited for whatever reason. At this point cut the trade in half by selling 1 contract. With the remaining contract, let it run. If price then goes to 103/104 then close the last half. If price goes to say 110 then that is a bonus and you up 5 more than expected :)

HTH

<hr>
Hi Zow

To be honest it does and it doesn't. Part of me agrees with what your saying, but the other half says your doubling your losses without necessarily doubling your gains.

Actually, the more I think of it - the more I know your right.
Thanks for explaining it :p
 

Mr. Charts

Legendary member
7,364 1,181
Exit strategies to maximise profits/minimise losses are dependent on the trading time frame. Certainly in US intraday trading I teach specific rules which have served me well over the last four years.
Essentially they lock in profits and are designed to and succeed in
achieving steady consistent profits from trading. In effect they are market controlled, dynamic and not arbitrary. They take large chunks out of trends 85%-90% of the time, but occasionally leave money on the table since we don't know what the market is going to do next.
One of the essentials, imho, is to scale out when there is evidence that the probability of a reversal is increasing.
It is very easy for new traders and even some experienced ones, to fall into the perennial trap of wishing they had closed/continued a trade once they have the benefit of hindsight.
Risk increases and control is surrendered when positions are held overnight as the probability of unanticipated news affecting price forces larger losses. That weakens effective money management as well as taking position management out of the trader's control.
Imho, the only safe way to trade overnight is by using a delta neutral strategy.
Intraday, risk can be managed relatively easily.
Risk is there to be embraced and controlled, not to damage us.
We cannot control the market, (except very rarely and temporarily), only our own trading behaviour.
 

zow

Active member
136 0
FTSE Beater said:

Hi Grubs

I'm sorry I didn't make it clear :eek:
Say your trading 2 contracts. Buy in at 100. Price moves up to 105 and this is where you would have exited for whatever reason. At this point cut the trade in half by selling 1 contract. With the remaining contract, let it run. If price then goes to 103/104 then close the last half. If price goes to say 110 then that is a bonus and you up 5 more than expected :)

HTH

<hr>
Hi Zow

To be honest it does and it doesn't. Part of me agrees with what your saying, but the other half says your doubling your losses without necessarily doubling your gains.

Actually, the more I think of it - the more I know your right.
Thanks for explaining it :p

Eh? When would the losses double?
Just above you were explaining about scaling out to GRUBS, it's exactly the same principle scaling in....... :!:
 

grubs50

Well-known member
408 0
But FTSEbeater i only spreadbet, i've been only been trading (with real money) for about 6 months and my time frame varies from a few minutes( if the Dow suddenly goes crazy and i'm in a good position) to 4-5 days so i am probably a swing trader. A typical example was yesterday when i was long Dow futures and got to 15 points (2ce) with what i felt from d beginning was a dodgy entry but i panicked and closed it for just 1 point cos i didn't want to go into negative territory even tho i feel if i'd held on for a few days , i will probably make more points.