Disliked{quote} Hi G. My note evaporated. An occasional problem here with WiFi USB connections. But some more of my mumblings from out of the ether. I was happy to see your reply which confirms my thinking that the regular Harvesting of profit from a growing Floating Profit is the way to go. Looking at several of my back testing models I have come to believe that for longer running Trends taking profit, perhaps via Limit Orders somewhere between 500 to 750 pips for each position, results in the smoothest relation between FP and Balance. Above that only...Ignored
I'm pretty good at cutting losses short and letting profits run, which are the other two tenants of good trading, though I have to allow myself minor mistakes in that area. I can always re-enter a trade if I fail to let profits run, so that's not too dangerous to my long term survival in the markets. As for cutting losses short, I have taken the pledge to never allow myself to have a large loss again, and I can't allow any mistakes there as it could wipe out my account. When trying to buy low and sell high, sometimes price goes to an even higher peak after I have taken off a lot for profit, but that's fine when I still have 4 more running, and I'll never get better at it if I don't try very hard to improve.
Generally, we have no control over which direction price will go or how fast it will go there. We do have control over which pair we choose to trade, which direction we choose to trade, where we enter and where we exit. I like to maintain as much control over those factors I can affect as possible to help offset the complete absence of control over direction and speed of price movement. That's why almost all of my entries and exits are taken manually even though I'm always trading with SL's and TP's. If I mess up a trade I can try to understand my mistake and do better next time. If the market does something unexpected and messes up my trade, I have no way to fix the market, so I am at a loss as to how to improve.
The reason to take profit off the bottom rung when the third lot is put on is mainly a risk management decision, as I discussed earlier. I will almost always do that to reduce the risk profile in the riskiest part of my trade, when I have just put the third lot on and I'm carrying unrealized gains and have trading capital still at risk. Additionally, that third lot usually goes on when price has made a nice move in my favor, so taking the first off at that point usually results in the "selling High" part of the winning equation. It's very effective.