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Q for veteran traders that may help rookies..

  • Post #1
  • Quote
  • First Post: Dec 14, 2009 6:26pm Dec 14, 2009 6:26pm
This is a question for seasoned veterans that I feel will help me and as well as other nonseasoned traders struggling in the markets. When do you take profit?

In my case, I do not seem to understand when to take a profit. This has plagued me for quite some time since I moved into discretionary trading. Lets say a position moves in my favor quickly (in 4 hours). It is meant to be held for more than a day, less than a week (swing trade). Lets say it went in my favor 80 plus pips. The 4 hours, it moves against me, stopping me out (using a fixed stop loss).

This usually happens to me, where I immediately go into positive territory but since I want to hold on to winners I get stopped out. For some strange reason, when looking back a many of my mistakes, I sensed that I should exit during those immediate moves.

I always wonder how you make money by holding on to winners like so many traders say. I know it doesnt help me.. however, it may have helped others.

When I go back and analyze my trades I always find that it was best to take the earlier profit which is usually greater than a 2:1 risk reward ratio. So if I did take profit it would have been a pretty good trade.

And so, I am left confused when the advice is to hold on to winners because taking profit too early is a result of fear of losing. Is this my case?
Quoting forexstudent
This is a question for seasoned veterans that I feel will help me and as well as other nonseasoned traders struggling in the markets. When do you take profit?

[size=2]In my case, I do not seem to understand when to take a profit. This has plagued me for quite some time since I moved into discretionary trading. Lets say a position moves in my favor quickly (in 4 hours). It is meant to be held for more than a day, less than a week (swing trade). Lets say it went in my favor 80 plus pips. The 4 hours, it moves against me, stopping...
Taking profit is a personal thing that differs from person to person. This means that what is comfortable for one will be taboo for another, therefore there is no answer that a seasoned trader can really give you because the term "seasoned or senior" represents a scope of time where they have learnt to become comfortable with there choices.

This is by no means meant to discourage you from asking but in all honesty you are going to get a bag of results from your question that will lead you no where. People will overtime learn to accept risks. They learn to accept the initial trade risk, they learn to accept the risk of moving to Breakeven only to be stopped out and they learn that there is no right or wrong way to take profits so long as you manage your risk appropriately and take profits to give you gains overtime.

Sorry if this isnt of more help to your question but it is my honest scope on how this will pan out for you.

Razor

PS: if you want me to give you more feedback then open your Private Message option and I will elaborate more for you
Just answered a question like this on another thread.

I'm NOT a seasoned trader at all, so it's just my 2 cents...

I don't use TP. Exits are discretionary. I use next S/R level, PA, news coming...

BUT, if you really are prone to that "don't let your winners become losers" stuff, you can always take 1/2 position at 1:1 and move the stop to b/e...

But it' s a very, very personal issue, as Razor stated before...

Cheers!
Many share my views with me. But I don't share them with them...
Quoting Razor_trader
Taking profit is a personal thing that differs from person to person. ....Sorry if this isnt of more help to your question but it is my honest scope on how this will pan out for you.

PS: if you want me to give you more feedback then open your Private Message option and I will elaborate more for you
I honestly think this is tremendous help-- if I am reading into this correctly. Trading and taking profits is developed, and not cloned. It seems to me the value in what you are saying is the ability to sense risk and opportunity. This cannot be learned in the classroom but through trial error. I think my mind is closed to seeing profit taking as a function of our individual ability to take risks.

Perhaps my confusion in the past came from not knowing that profit taking is individual. If I am correct in this, then it leads me to other questions..

I have my private set up. As a junior member I cant seem to send out a private but I should be able to receive them. I welcome any advice you are willing to give.
Quoting HouseTrader
I don't use TP. Exits are discretionary. I use next S/R level, PA, news coming...

BUT, if you really are prone to that "don't let your winners become losers" stuff, you can always take 1/2 position at 1:1 and move the stop to b/e...
As you and Housetrader said, developing a profit taking strategy is simply unique to the individual, and it looks like I have some thinking to do because I never have seen it that way. I always thought there is 1 way and that stems from being mathematical. I always thought profit taking was a mere calculation of risk:reward.

So here is what I have been facing: I tend to hold my winners until they become LOSERS! Arggggg.. Why? Perhaps its because I 'want' to hold my trades long-term but it is contrary to my very nature, as I am a short term trader in heart.

It seems that my "wants" (holding the trade) outweigh my "judgement"(seeing and entering in position to profit from intraday moves).
Quoting forexstudent
As you and Housetrader said, developing a profit taking strategy is simply unique to the individual, and it looks like I have some thinking to do because I never have seen it that way. I always thought there is 1 way and that stems from being mathematical. I always thought profit taking was a mere calculation of risk:reward.

So here is what I have been facing: I tend to hold my winners until they become LOSERS! Arggggg.. Why? Perhaps its because I 'want' to hold my trades long-term but it is contrary to my very nature, as I am a short term trader...
well, doesn't it uniquely your way? to think that there's only 1 way for profit taking and that is through calculation of risk:reward?

but the real question is: how long would you like to stay loosing?
I take the path whereby I take half profit when it reach my reasonable target ; let the remaining run with SL +1.

I rather end up any trade with breakeven rather than -ve territory.

Juz find a way which u think suit u and ur trading methodology the most.

Wish you all the best
Quoting forexstudent
As you and Housetrader said, developing a profit taking strategy is simply unique to the individual, and it looks like I have some thinking to do because I never have seen it that way. I always thought there is 1 way and that stems from being mathematical. I always thought profit taking was a mere calculation of risk:reward.

So here is what I have been facing: I tend to hold my winners until they become LOSERS! Arggggg.. Why? Perhaps its because I 'want' to hold my trades long-term but it is contrary to my very nature, as I am a short term trader...
Well, student... it seems that you are finding your trading style. Remember that there isn't a right way, "one size doesn't fit all"...

So you are an intraday trader. Nothing wrong with that! My answer was based on my trading style, I usually hold my trades for 3-4 days, sometimes a couple of weeks. Assume that you are a short-term trader and go for it.

In this case, waiting for the next major S/R level or taking 1/2 off and moving to b/e would not be the best, cause it fits more to the swingers. When I traded intraday, I found the best choice targeting around the daily pivots (usually the market stalls at them) and exit as soon as possible. Intraday means tight SL, and low market exposure, so moving SL to B/e is, IMO, bending your trading style.

Cheers!
Many share my views with me. But I don't share them with them...
Quoting Zen
but the real question is: how long would you like to stay loosing?
I would definitely like to answer your question. I want to start winning starting today. I am tired of my lack of positive expectancy and I want this aspect of my trading to end. (taking profits). That is why I started to look away from books and now I am here on forexfactory to see what I am doing wrong in applying money management.. Some have already gave me lightbulbs and I am grateful.
Quoting mphpopular
I take the path whereby I take half profit when it reach my reasonable target ; let the remaining run with SL +1.

I rather end up any trade with breakeven rather than -ve territory.

Juz find a way which u think suit u and ur trading methodology the most.

Wish you all the best
Thank you for your post. I will look into your journal. B/E has been mentioned again. I am starting to pay attention. I never have done breakeven.. it has either been stopped out or trailing when in positive territory. That "shady" area where the trade makes its first move is a time I have little decisiveness. Perhaps this is where I should breakeven. However, this is a time of more volatility so I can easily get stopped. Keeping with the theme of Breakeven I wonder if I should wait for it to be in positive territory before moving to breakeven. The moves I look for tend to be 75 to 150 pips.

It is very difficult for me psychologically to place B/E points. My intuition says to take some profit after a first move but my "other side" always wants to keep the stop far below just to see how far the move takes me. It usually ends up going back the other way back toward my stop. Then I end up adding to the position hoping it goes my way again. Its truly an ugly display of bad money mgt and it is pretty embarrasing to say this.

Your 1 pip SL is truly tight whereas my equivalent would be 8 pips. You must scalp.
Quoting HouseTrader
Well, student... it seems that you are finding your trading style. Remember that there isn't a right way, "one size doesn't fit all"...

So you are an intraday trader. Nothing wrong with that! My answer was based on my trading style, I usually hold my trades for 3-4 days, sometimes a couple of weeks. Assume that you are a short-term trader and go for it.

In this case, waiting for the next major S/R level or taking 1/2 off and moving to b/e would not be the best, cause it fits more to the swingers. When I traded intraday, I found the best choice...
Since posting, lightbulbs have been constantly firing above my head. It must be indeed a path to finding my trading style. I really appreaciate these words of wisdom. I am a short term trader, I really like longer term trading but my eyes seem to be able to pick the short term moves (1hr to 6 hr duration) easier so I am just assuming I am a better short term trader. Longer term strategies do appeal to me b/c there seems to be more time to think and you can definitely ignore much of the market noise. But I enjoy them at a distance b/c I have never been able to see the moves. Sometimes, and only sometimes, a short term trade that I took was a spring board to a larger long term move that ended 1-5 days later and I wish I could have known in order to make a killing. The problem is that I cannot tell the moves that I pick out to be sustaining or just a quick intraday move. The vast majority of my trades end up being quick intraday moves of 1-6hrs.

The S/L advice on the last paragragh is making me think of specific price action that I have only seen in intraday moves. I will get back to you on this with more questions.
Ok, here is a live trade happening and this may be a great way to show you what I tend to do..

NZD/JPY

9:10ish AM Central US Time

Bought long at ~64.68 when broke out of short term resistance of 64.62
-I saw this resistance at 12/14/09 at 1030am and 12/15/09 at 13:00pm.
-The move was confirmed as it was the first significant move after the US opened..

Currently, it is in positive territory at 64.88.

I am hoping this move lasts 1 day so I am not doing for intraday. However, as previous posts made me think that perhaps I should just stick with intraday since this seems to fit my style better.

So, if its intrader, as Housetrader says, look for next S/R, pivot points. I will get back to this post after figuring this out..
ok. Pivot points:
R1 64.84 -- stalling here. It is also resistance on 12/14 daily bar.

R2 65.25 --if penetrates I do not see any prices here since 11/24 Thanks giving. During that time Nzd markets dropped like a knife.. now its back up..

So I will leave it be for now. Its just one trade but I hope it illustrates what I am doing wrong or right..
Quoting forexstudent
ok. Pivot points:
R1 64.84 -- stalling here. It is also resistance on 12/14 daily bar.

R2 65.25 --if penetrates I do not see any prices here since 11/24 Thanks giving. During that time Nzd markets dropped like a knife.. now its back up..

So I will leave it be for now. Its just one trade but I hope it illustrates what I am doing wrong or right..
Just opened my NZD/JPY chart.... I don't usually trade it.

Seems to me you are buying the breakout of a minor S/R and/or the breakout of a 1-2-3 formation, right? I'm guessing, cause that's what I see on 5M/15M charts. But I don't knoe which TF you are using, and your SL, but as I'm used to see thru larger TFs, I'd say you are buying against an important psychological level (65.00) and price usually stalls at them. But thats' just how I see, it, ok?

Cheers!
Many share my views with me. But I don't share them with them...
  • Post #15
  • Quote
  • Edited 3:18pm Dec 15, 2009 2:06pm | Edited 3:18pm
Quoting HouseTrader
Just seems to me you are buying the breakout of a minor S/R and/or the breakout of a 1-2-3 formation, right? I'm guessing, cause that's what I see on 5M/15M charts. But I don't knoe which TF you are using, and your SL, but as I'm used to see thru larger TFs, I'd say you are buying against an important psychological level (65.00) and price usually stalls at them. But thats' just how I see, it, ok?

Cheers!
The Nzd/jpy is similar to G/J and other Yen pairs but it is less erratic during the day. I trade the major currencies, its just this week I am going to less volatility until I get things right.

Yes, I do see the minor S/R breakout. Also, I adhere closely to time of the day. In particular the opening price action of each market session (Japanese, London, US). I try to filter noise and find the underlying trend for that market that day. I am looking for when direction of the herd, stop targeting, and then the first move. I try to trade that first move. That first move is so elusive.

I noticed the 1-2-3 breakout but that is only after you mentioned it. I do not know how to trade it but it is significant. You are seeing the same thing as me.

I look for it to reach 65.00 to see if I should take profit.
Stop: 10 pips below breakout 64.62.
Entry: 64.68.
R:R ==>2:1 for this trade...

The psychological level.. thats significant.. I didnt see it that way.. will wait and see..
Quoting forexstudent
I would definitely like to answer your question. I want to start winning starting today. I am tired of my lack of positive expectancy and I want this aspect of my trading to end. (taking profits). That is why I started to look away from books and now I am here on forexfactory to see what I am doing wrong in applying money management.. Some have already gave me lightbulbs and I am grateful.
Good.

Then the first thing you must realize is that you got the wrong mindset. Here trying to find what you're doing wrong can be the leap you're looking for, but it can also be nothing.

You must unlearn the thinking that "there's only 1 way for one thing." That's the wrong mindset I meant. Because, I believe, that's the thinking which brought you all those losses.

Since it's only the profit taking part which trouble you, start a new in it. Consider yourself you have no idea at all about it. Try each and every advise you get in here, see if there's any which feel right to you.

Another way, a more grueling way, is to backtest your system manually. First for a year back, then add more year up until 4 years in a row. Then check the probability of the result (year by year). Write your trading rules base on what you find there.

Just for your encouragement, I did backtest of my system up until 10 years back (four years to get the trading rules, and 6 years to check it out). I did the four years 6 times, to make sure I did it right---not cheating in anyway. And the 6 years three times for the same reason. All in all, it took about 4 years, from getting the idea until I completely satisfied with it. And the result? Waaay beyond my imagination. (By the way, during my system building, I concentrated on maximizing gain instead of minimizing loosing.)

Good luck to you, student.
Quoting forexstudent
The Nzd/jpy is similar to G/J and other Yen pairs but it is less erratic during the day. I trade the major currencies, its just this week I am going to less volatility until I get things right.

Yes, I do see the minor S/R breakout. Also, I adhere closely to time of the day. In particular the opening price action of each market session (Japanese, London, US). I try to filter noise and find the underlying trend for that market that day. I am looking for when direction of the herd, stop targeting, and then the first move. I try to trade that first...
Hope you have stick to your intraday approach and took the profit off the table, cause otherwise you have just been burned... NZD/JPY just diving...
Many share my views with me. But I don't share them with them...
  • Post #18
  • Quote
  • Edited 1:05am Dec 16, 2009 12:49am | Edited 1:05am
Quoting HouseTrader
Hope you have stick to your intraday approach and took the profit off the table, cause otherwise you have just been burned... NZD/JPY just diving...
I really appreciate you post, Housetrader, what you said in the earlier post should have warned me on this one. (You said 65.00 is a major psychological level). Indeed, I got burned . This is such a great example.... lets put it a better way.. an awesome example of what I do wrong. I tend to hold these trades to long..hoping it goes higher. All the input is starting to make things clearer for me. I should be looking to take profits much earlier (in today's case at R1).

Instead I get stopped out and witness a NZD/JPY falling knife...

By the way, at major psychological levels, is it usually a strong S/R point? Do you trade it after it gets penetraded?

Thanks in advance any help you can give me.
Quoting Zen
You must unlearn the thinking that "there's only 1 way for one thing." That's the wrong mindset I meant. Because, I believe, that's the thinking which brought you all those losses.

Since it's only the profit taking part which trouble you, start a new in it. Consider yourself you have no idea at all about it. Try each and every advise you get in here, see if there's any which feel right to you.

Another way, a more grueling way, is to backtest your system manually.
Zen, I feel like I am speaking to a true master, honestly. I am a firm believer of the power of the mindset. Thanks for bringing this into the forefront of my mind (that there isnt only 1 way). Also, I think the suggestion to start new as if I know nothing is pretty powerful. I never thought of things in that way. Also, I have backtested but not nearly as extensive as yours. This is because I havent found a way to simulate real time moves and news reactions. In other words, the "feel" is not the same. However, the backtest did give me valuable data on the extent of price moves that I use for my stop losses. I will look into backtesting some more..

I am grateful for your help.
  • Post #20
  • Quote
  • Last Post: Dec 16, 2009 1:55am Dec 16, 2009 1:55am
true master? woa....far from it, bro. still learning just like yourself. and still sore from the bruises of newbie. but thanks anyway.

and, again, good luck to you.
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