When to exit for profit

[pengeshark]

Hello all. I've been daytrading Crude Oil and EURUSD now for a few months. I have a setup which I look for and a trigger to enter the market plus a strict money management strategy. On each trade my Risk Reward is well defined at least (risk = 1 reward = 2.5). This is determined by the entry point subtracted by the stop loss, going long or the oppostite going short. My question is this, should I use a fixed profit target which I find easier psychologically or should I trade my system with moving technical stops in relation to my chart setup and take what profit the market will give which lately has been up to a risk reward of 1 to 3 or 4?
Thanks

 

[rawrschach]

Once it hits your target use a trailing stop.

 

[jiggly]

do not cap your profits, let the market take you out when it hits your trailing stop.

it is very difficult to do, but to make BIG money trading you need to be adding to your position riding a trend,

from my experiences, a hit a run strategy with fixed R:R and a better than 50:50 win rate can still turn unprofitable if you do not take every single trade that it spits out. and i mean there is no room to miss even a few, as those could be the profitable ones after your losing streak and then you may go straight into another losing streak fafter not banking any profits.

at least following the longer term trend you can have market poise, and take your time, to a certain degree. trade larger when you are right and a lot less when you are wrong, you can achieve this by adding to your position as the market moves in your favour and proves you correct. this is what we mean when we say minimise your losses and maximise your profits.

I know we read this and that about risk vs reward and know your exit before you enter blah blah, but it is really all BULL ****, no one knows what is going to happen, it may move in your favour but not hit your target at all, at least if you trail your stop you can collar the market and go with it if it continues to go further than what you initially thought. and if it doesn't get to your target, then at least the market can take you out hopefully with some profit.

 

[pengeshark]

do not cap your profits, let the market take you out when it hits your trailing stop.

it is very difficult to do, but to make BIG money trading you need to be adding to your position riding a trend,

from my experiences, a hit a run strategy with fixed R:R and a better than 50:50 win rate can still turn unprofitable if you do not take every single trade that it spits out. and i mean there is no room to miss even a few, as those could be the profitable ones after your losing streak and then you may go straight into another losing streak fafter not banking any profits.

at least following the longer term trend you can have market poise, and take your time, to a certain degree. trade larger when you are right and a lot less when you are wrong, you can achieve this by adding to your position as the market moves in your favour and proves you correct. this is what we mean when we say minimise your losses and maximise your profits.

I know we read this and that about risk vs reward and know your exit before you enter blah blah, but it is really all BULL ****, no one knows what is going to happen, it may move in your favour but not hit your target at all, at least if you trail your stop you can collar the market and go with it if it continues to go further than what you initially thought. and if it doesn't get to your target, then at least the market can take you out hopefully with some profit.

Thanks, I guess you have also answered my next question that I was thinking of having a fixed target of profit per day daytrading (and a fixed loss as a circut breaker to stop trading) with the profit being 3 times loss. The idea behind this is to have a realistic projection to get me to my goals and to stop overtrading, if I let a profit run and do well out of it, reach my daily goals and get another signal that day or many that day do I take them all?

 

[£10kLoser]

I agree with jiggly. We all want a mechanical system so we don't have to think but the market aint like that! I would also add that you don't have to have such a big profit/risk ratio. I usually trade 1:1 - the point being that our advantage should be in picking the right trade. When the trade is comfortably in profit, I manually reduce the stop (use a trailing stop if you prefer but don't put it too close).

Additionally, stops need to be increased when the market is more volatile and don't be afraid to have large ones if needs be! That said, when the market goes haywire, take the day (or the week) off.

I have learnt to take a day's profit and relax. It's demoralising to trade again and lose! If you can produce consistent profits, I would say to increase you position size, not your number of trades.

 

[jiggly]

Thanks, I guess you have also answered my next question that I was thinking of having a fixed target of profit per day daytrading (and a fixed loss as a circut breaker to stop trading) with the profit being 3 times loss. The idea behind this is to have a realistic projection to get me to my goals and to stop overtrading, if I let a profit run and do well out of it, reach my daily goals and get another signal that day or many that day do I take them all?

I did that, once upon a time, I set myself a daily return of a measly 1% of equity, which i thought was very conservative and achievable.

I found that I would take signals and trade in and out of larger swings (i.e trying to capture minor fluctuations as well, daytrading)

result, if I had stuck with the longer term view, I would have been up a significant amount for less effort as opposed to being practically where i started, the vast majority of the time, the market would swing maybe 400 pips, and at the end of it I would be either down or up only a fraction, even though my longer term view was correct.

you see when we combine too many variables with too many signals with too much emphasise placed on timing, with too tight stops, you have a financial time bomb on your hands. I was doing nothing but consistantly dying of slow bleed trading like this.

my best suggestion, and it will be said a million times by a million wannabe traders is to read, reminiscences of a stock operator, the jesse livermore story. Then just implement the wisdom which is in plain english in that book.

I have read it a total of 5 times, did I really do what was said in there for the first 4 reads. no. and my guess is that 95% of others have done the same.

 

[MrGecko]

If you can, try to make your minimum position size at 2 or 3 lots; reason being, if you are long or short 1 lot you only have one option on the table, namely to close.

By using 2+ lots, you can afford yourself some flexibility in managing the trade. You're stop, wherever you choose to put it, can be used to exit the whole position: but with 2 lots, you can then, say, take half off @ Target 1, and add trailing stop on the 2nd half, or move your stop to BE and wait for Target 2, and so on.

just something to think about.

 

[cryten]

Even with day trading I now beleive in locking in your profits with a trailing stop is the way to go. I use a 500 tick chart and there are enough good movers especially when considering a 10 or 15 tick stop. My system gives a very high strike rate but putting in a set TP can be quite damaging some days. i think a set tp level can only be viable long term if I place a limit order 5 or 10 ticks away so that price retraces first but then most of my signals don't have a retrace so then I am settling for taking all the crappy trades? Tried looking at different indicators to help with exit but ultimately they take the trade out too soon where a TS would have returned most or a good portion of the move.

Hope that makes sense, Iv'e not slept yet :cheesy:

 

[cryten]

I will also add this approach only works for me on the Indices. In fx I kept getting taken out too often so therefore a larger trail was needed but then the more room you give your trades the MM has to be adjusted yet again.

**This is all day trading, in longer timeframes I beleive the MM side easier to fathom with much larger Take profits you can work the sl a bit more**

 

[pengeshark]

Thanks everyone so far for you input. Some interesting points, with trading oil I have found that I'm doing ok to well because my system is based on trend momentum and oil seems to suit this. But looking at the last month or two a trailing stop or a longer time frame may have been more effective. The only thing for me is that a fixed exit point based on risk / reward creates discipline when I trade and I find it psycologically easy to employ. Not to say that this is the right approach but that’s why I will now look at some of the suggestions that have been made so far.

 

[4rex4life]

I usually move my SL to most recent low in a buy trade and most recent high in a sell trade... This way I can ride the waves much longer than having trades with fixed SL and TP...

The chandelier stop for MT4 is also a good indicator to trail your trades.