What is the best way to take profits?

[mrsoul]

Greetings Fellow traders,

I am wondering if anyone has any thoughts on the best way to take profits.

I usually try for a price target; however, many times, half way to my price target
the price stalls or reverses a little bit, so, oftentimes, I take a profit for only half of the move, only to then watch, manytimes, the price eventually reach my target objective or go higher.

I hate to give up a decent profit once I have it, but it is EXTREMELY, frustrating to watch the price hit my target after I get out.

I have experimented wth trailng stops but, oftentimes, these get hit before the price reaches my target.

This doesn't seem to be an easy question to answer; afterall, if one has a profit, one does not know for sure that it will keep going to the target price and it really is a lousy feeling to give up the profit by holding until it reaches your target.

Perhaps the old adage is true: "You can make money as a bear or as a bull but pigs get slaughtered".

Any thoughts on this subject?

 

[Shakone]

This is just like the stop-loss question. There can't be just one answer to this. It depends on so many things. Look at your system, and look at what would be the best times to take profits for that system. That is all that can be said.

If price is stalling, coming down a bit, then moving up and hitting your orignal target, then

A)realise that is normal behaviour and it is likely to still hit your target so hold it
B)decide to take some profits at the point it is stalling and hold the rest for your main target
C)adjust entries, stops and/or targets.

 

[mrsoul]

This is just like the stop-loss question. There can't be just one answer to this. It depends on so many things. Look at your system, and look at what would be the best times to take profits for that system. That is all that can be said.

If price is stalling, coming down a bit, then moving up and hitting your orignal target, then

A)realise that is normal behaviour and it is likely to still hit your target so hold it
B)decide to take some profits at the point it is stalling and hold the rest for your main target
C)adjust entries, stops and/or targets.

I like suggestion B, Shakone.
I am going to experiment by selling half my position when price stalls or starts to reverse a little and hold half and see if it reaches my target.
-Thanks

 

[Tileman]

Greetings Fellow traders,

I am wondering if anyone has any thoughts on the best way to take profits.

I usually try for a price target; however, many times, half way to my price target
the price stalls or reverses a little bit, so, oftentimes, I take a profit for only half of the move, only to then watch, manytimes, the price eventually reach my target objective or go higher.

I hate to give up a decent profit once I have it, but it is EXTREMELY, frustrating to watch the price hit my target after I get out.

I have experimented wth trailng stops but, oftentimes, these get hit before the price reaches my target.

This doesn't seem to be an easy question to answer; afterall, if one has a profit, one does not know for sure that it will keep going to the target price and it really is a lousy feeling to give up the profit by holding until it reaches your target.

Perhaps the old adage is true: "You can make money as a bear or as a bull but pigs get slaughtered".

Any thoughts on this subject?

You can always set your stop and target and walk away from your screen (set audio alerts for when these levels are reached) Removes alot of emotion.

Regards
Graham

 

[mrsoul]

You can always set your stop and target and walk away from your screen (set audio alerts for when these levels are reached) Removes alot of emotion.

Regards
Graham

That is a good idea Graham.
I've thought about it before.
The idea of being able to walk away, without any emotions, is a very appealing way to trade.

The only concern I have about this method, and why I haven't employed it yet, is if price is half way or three quarters of the way to your target, and then it turns around and it ends up hitting your stop.

I would HATE that scenario, which is my main concern about using an oco order.

However, if the trade is done 1,000,000 times, using an oco order might be the most profitable way to trade.

I wish I knew the statistics, if the trade was done 1,000,000 times.
Then the answer would be clear.

Using an oco order on, let's say, 100 trades might not be statistically significant enough to answer the question as to whether an oco is the most profitable way to trade.

I am going to experiment though with the oco and try to determine if this is the best way to trade- it certainly is very appealing.

Thanks for the idea- I'll let you know what I find.

Best of Luck,

Michael

"When in doubt stay out"

 

[trader_dante]

That is a good idea Graham.
I've thought about it before.
The idea of being able to walk away, without any emotions, is a very appealing way to trade.

The only concern I have about this method, and why I haven't employed it yet, is if price is half way or three quarters of the way to your target, and then it turns around and it ends up hitting your stop.

I would HATE that scenario, which is my main concern about using an oco order.

However, if the trade is done 1,000,000 times, using an oco order might be the most profitable way to trade.

I wish I knew the statistics, if the trade was done 1,000,000 times.
Then the answer would be clear.

Using an oco order on, let's say, 100 trades might not be statistically significant enough to answer the question as to whether an oco is the most profitable way to trade.

I am going to experiment though with the oco and try to determine if this is the best way to trade- it certainly is very appealing.

Thanks for the idea- I'll let you know what I find.

Best of Luck,

Michael

"When in doubt stay out"

Michael, I think 100 trades is statistically significant to see if something is working. I believe Mark Douglas (author of Trading in the Zone) said you needed 30. I tend to think 50 is enough. 100 almost certainly.

I had the same problem as you. Always taking profits early only to see them hit my target.

Now I just refuse to move my stop and sure, many times I see price go two thirds of the way to my target and then come back and stop me out. I'm used to that now and I know that I make more money from leaving my stop and playing for my target (or very near to it) then taking profits (be they all or partial) because I have statistically proven it works for me.

I only made one trade today. I saw a 49 point profit come back to a 30 point loss. That is the nature of the game for me. I see people say "never let a winner turn into a loser" all the time. If I followed that rationale, I would never make money.

 

[b4gt]

I have read in John Carter's book about a strategy he uses in trailing stops. He says

Due to retracement price patterns while in a play, the two-bar trailing stop will have to at times be held on the current "stop bar" until the trend resumes. Once the trend resumes, the two-bar trailing stop can also be resumed.

I interpret the above as when I see a red bar/candle following greens I suspend moving the stop higher. When I see two green candles I start moving the stop again. I started using this technique a couple of weeks now. So far I haven't been kicked out from any stock but then again I see some of my positions move back and forward between green and red days.

Would it be sane exit strategy to wait until the trailing stop gets hit or until a certain period of time without trend has passed?

Can someone comment on that please?

 

[mrsoul]

Michael, I think 100 trades is statistically significant to see if something is working. I believe Mark Douglas (author of Trading in the Zone) said you needed 30. I tend to think 50 is enough. 100 almost certainly.

I had the same problem as you. Always taking profits early only to see them hit my target.

Now I just refuse to move my stop and sure, many times I see price go two thirds of the way to my target and then come back and stop me out. I'm used to that now and I know that I make more money from leaving my stop and playing for my target (or very near to it) then taking profits (be they all or partial) because I have statistically proven it works for me.

I only made one trade today. I saw a 49 point profit come back to a 30 point loss. That is the nature of the game for me. I see people say "never let a winner turn into a loser" all the time. If I followed that rationale, I would never make money.

Thanks for the idea Dante.
I am going to experiment with it, small size, until I can get comfortable with it.
Happy Trading!

 

[mrsoul]

I have read in John Carter's book about a strategy he uses in trailing stops. He says



I interpret the above as when I see a red bar/candle following greens I suspend moving the stop higher. When I see two green candles I start moving the stop again. I started using this technique a couple of weeks now. So far I haven't been kicked out from any stock but then again I see some of my positions move back and forward between green and red days.

Would it be sane exit strategy to wait until the trailing stop gets hit or until a certain period of time without trend has passed?

Can someone comment on that please?

Thanks for another interesting idea b4gt.
I am going to play with it.
IMO probably better off waiting for the trailing stop to get hit because trends can resume, sharply, after price consolidation occurs.

 

[Anne Onymous]

Hi,
I think an important part of your question is the following:

"I usually try for a price target; however, many times, half way to my price target
the price stalls or reverses a little bit, so, oftentimes, I take a profit for only half of the move, only to then watch, manytimes, the price eventually reach my target objective or go higher."

To answer this specific problem, without getting into any trailing stop-loss or oco alternatives, I think a key thing is for you to be able to quantify your statement. Do you keep a journal? Do you have a record the past say 50 occurrences of this phenomenon?
What I am saying is that if you manage to estimate a ratio for this "many times", then simple algebra can perhaps help you decide how to act.
trader_dante said he lets his position run now, meaning he has probably realized that more than 50% of the times, his target would be hit.
That is, if your "many times" is indeed >50%, you will always be more profitable if you let your position run and move your stop at BE once you reach 1/2 profit target, than taking profits 1/2 way.
Hope that helps.

 

[MainCycleV]

Confidence about your judgement, identify fake movement

 

[forker]

one of the things i learned is to judge if you need one or multiple targets based on previous price. if you want to acheive the optimal level of performance you shouldnt set in stone to have one or more targets for every trade. i know someone who trades like Dante but unless your setups are based on long running profits this strategy will chew away at your account because the winners dont pay for the losers. i have an average win rate of 65% which on the surface looks ok but when you peal away the trades a different picture reveals itself. a fluctuating range of between 20-30% of my winners would have turned out to be losers if i just let myself get stopped out. it took me years before i could see it right in front me!!!! when i took a trade if previous price formation projected forward is out of range of the distance from my entry to my target then i employ a Dante strategy. the difference is i trail my stop behind price swings. my statistics shows if there is no previous price formations in the way then you should hit your target most of the time ( no supp\resistance in the way) if there is price formations in the way then i split my targets up, my first objective is the previous price formation where i close off 1/3 of my position and bring my stop to either behind the last price swing if price allows or to break even + trade costs. usually i hit 2 of three targets with this strategy before price takes me out but the point is i now have a free trade on with profits locked in. if the trade turns as it does between 20-30% of the time i have still made money and covered my costs. the few runners i do get are where my bread and butter comes from its not these small winners but they serve a purpose of reducing the impact the losers would have on my account.

 

[new_trader]

Confidence about your judgement, identify fake movement

Very good! Excellent! You must study and practice more and you will learn to recognize the differences between a real opportunity and an apparently real opportunity. This requires absolute masterful control of yourself to sit and watch and wait and figure. You cannot allow yourself to be duped into entering when it is not time. However your judgement will not always be 100% accurate and this is why you should keep your stop as close as possible to your point of entry. If the movement is real the market will not retrace to your point of entry let alone your stop.

 

[Splitlink]

Michael, I think 100 trades is statistically significant to see if something is working. I believe Mark Douglas (author of Trading in the Zone) said you needed 30. I tend to think 50 is enough. 100 almost certainly.

I had the same problem as you. Always taking profits early only to see them hit my target.

Now I just refuse to move my stop and sure, many times I see price go two thirds of the way to my target and then come back and stop me out. I'm used to that now and I know that I make more money from leaving my stop and playing for my target (or very near to it) then taking profits (be they all or partial) because I have statistically proven it works for me.

I only made one trade today. I saw a 49 point profit come back to a 30 point loss. That is the nature of the game for me. I see people say "never let a winner turn into a loser" all the time. If I followed that rationale, I would never make money.

Yes, that is a problem for me, too, mainly when I decide to leave a trade open when I have to leave trading for the day. When I come home at night, many times, I have seen my profit go, not to 30 points loss---I'm not that generous to the market --- but, certainly, to a breakeven stop.

Everyone has his character and deals with this in his own way. My way, now, is to close the whole trade and take what profit that I have, because I know that I am the most unlucky guy alive when it comes to leaving trades open like that.

On a smaller scale, over the period of an hour, I have, often,seen a 12 point profit turn into a loss and I ask myself why I let that happen when I am there, watching.

Split

 

[mrsoul]

one of the things i learned is to judge if you need one or multiple targets based on previous price. if you want to acheive the optimal level of performance you shouldnt set in stone to have one or more targets for every trade. i know someone who trades like Dante but unless your setups are based on long running profits this strategy will chew away at your account because the winners dont pay for the losers. i have an average win rate of 65% which on the surface looks ok but when you peal away the trades a different picture reveals itself. a fluctuating range of between 20-30% of my winners would have turned out to be losers if i just let myself get stopped out. it took me years before i could see it right in front me!!!! when i took a trade if previous price formation projected forward is out of range of the distance from my entry to my target then i employ a Dante strategy. the difference is i trail my stop behind price swings. my statistics shows if there is no previous price formations in the way then you should hit your target most of the time ( no supp\resistance in the way) if there is price formations in the way then i split my targets up, my first objective is the previous price formation where i close off 1/3 of my position and bring my stop to either behind the last price swing if price allows or to break even + trade costs. usually i hit 2 of three targets with this strategy before price takes me out but the point is i now have a free trade on with profits locked in. if the trade turns as it does between 20-30% of the time i have still made money and covered my costs. the few runners i do get are where my bread and butter comes from its not these small winners but they serve a purpose of reducing the impact the losers would have on my account.

great obseration forker- thanks

 

[mrsoul]

Hi,
I think an important part of your question is the following:

"I usually try for a price target; however, many times, half way to my price target
the price stalls or reverses a little bit, so, oftentimes, I take a profit for only half of the move, only to then watch, manytimes, the price eventually reach my target objective or go higher."

To answer this specific problem, without getting into any trailing stop-loss or oco alternatives, I think a key thing is for you to be able to quantify your statement. Do you keep a journal? Do you have a record the past say 50 occurrences of this phenomenon?
What I am saying is that if you manage to estimate a ratio for this "many times", then simple algebra can perhaps help you decide how to act.
trader_dante said he lets his position run now, meaning he has probably realized that more than 50% of the times, his target would be hit.
That is, if your "many times" is indeed >50%, you will always be more profitable if you let your position run and move your stop at BE once you reach 1/2 profit target, than taking profits 1/2 way.
Hope that helps.

thanks anne

 

[mrsoul]

thanks everyone for some great replies

 

[karl6666]

Greetings Fellow traders,

I am wondering if anyone has any thoughts on the best way to take profits.

I usually try for a price target; however, many times, half way to my price target
the price stalls or reverses a little bit, so, oftentimes, I take a profit for only half of the move, only to then watch, manytimes, the price eventually reach my target objective or go higher.

I hate to give up a decent profit once I have it, but it is EXTREMELY, frustrating to watch the price hit my target after I get out.

I have experimented wth trailng stops but, oftentimes, these get hit before the price reaches my target.

This doesn't seem to be an easy question to answer; afterall, if one has a profit, one does not know for sure that it will keep going to the target price and it really is a lousy feeling to give up the profit by holding until it reaches your target.

Perhaps the old adage is true: "You can make money as a bear or as a bull but pigs get slaughtered".

Any thoughts on this subject?

Probably the greatest hurdle is the psychological one for the trader. Its getting your head around, its real money on the screen, your not playing a video game.

a trader looses £1000 in a day - hes unhappy
breaks even - hes unhappy
pockets £1000 in a day, unhappy it wasnt £2000

I think as traders we should look at the overall balance, decide on the CASH amount he needs over the long term to build up some tasty wedge, and stick to it.

Money management basics and stick to them its a cash business your running here.

What business lets you have unlimited earnings, and you decide the losses...

K

 

[0007]

What business lets you have unlimited earnings, and you decide the losses...

K

....... and allows you to be totally in control of all the business decisions (independent traders). You don't get that working for someone else.