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When to Take Profits?

  • #1
  • First Post: Feb 14, 2007 12:18pm Feb 14, 2007 12:18pm
I was discussing when to take profits with a fellow forum member. Here is my response to him. When do you take your profits?

Joel,



Here is my current game plan.



I am basing my current strategy on The Rule of 72. This rule states that if you divide an interest rate into the number 72 the result is how many time periods it will take to double your money. For example if you were making 6% interest per year your money would double every 12 years.



My plan is that if I can achieve 24% interest per month than my money will double every 3 months. So my goal is 24% per month. To break it down a little further....I need to only capture 5% profit 5 times during the month to hit my 24% target. So my profit target to trigger closing my positions, capturing my profit and then reallocating is 5%.



Last night at 8:00pm I opened a EUR/USD and USD/CHF trade in a demo account with $20K. I set the new Interbank FX EA for a trail target of $1000 and a trailing stop of $200. (So if my total profit hit or exceeded $1000 all my positions would automatically be closed when it dropped back $200 from the highest point)



In this case sometime prior to 6:11am this morning (2-14-07) my total profit hit $1434.06 and then dropped back $200 and the EA automatically closed all my positions at 6:11am with a profit of $1234.06 or 6.17%. When I went to bed last night my profit was -$435. This is very cool and I only need to do it 4 more times in the next 4 weeks to beat my goal of 24%.



The thing that had killed me in the past was greed and too much thinking. Now I have a definite game plan with a clear objective in mind for every trade. With the Interbank FX EA it does not matter if I am awake, asleep or in some other state of oblivion....my Forex trading is on autopilot and I sure sleep good at night!



Paul

  • #2
  • Feb 14, 2007 12:38pm Feb 14, 2007 12:38pm
Quoting mintjelly

...


The thing that had killed me in the past was greed and too much thinking. Now I have a definite game plan with a clear objective in mind for every trade. With the Interbank FX EA it does not matter if I am awake, asleep or in some other state of oblivion....my Forex trading is on autopilot and I sure sleep good at night!


Paul

double your money every three months and greed has killed you in the past? So you are saying that your new plan is not greedy? I only wonder what your first plan was like.
Man who scratches ass should not bite fingernails
  • #3
  • Feb 14, 2007 12:46pm Feb 14, 2007 12:46pm
Good clear objective too.

Objective: to become a millionaire overnight with little capital while I sleep in a market where 95% of the participants lose all of their money.

I'm sorry buddy, i mean no disrespect - but if you are really planning on doing this with real money, let me be the first to advise you not to. You are better off going to a casino and betting all of it on red.
Man who scratches ass should not bite fingernails
  • #4
  • Feb 14, 2007 1:05pm Feb 14, 2007 1:05pm
  •  Trader#0000
  • | Status: Unregistered Trader
The way I decide to get out of a trade is with the Woodies indic.. if you overlay lsma over that, it tells me when the market is " overheated' and I get out...

I will try and post a screenshot here to illustrate my point

Have a look on Jan 23 where you see the vertical line... your cci line is crossing back through 100 down ( that means the move is over in my world) and the green/yellow/red lsma indic is also turning to yellow and pointing down.

Also when lsma gives a real high reading eg over 200 it means its overheating and I take profits then as I know it will turn around soon after such a high reading. Good example in this screenshot is around Jan 6... lsma reading -264.... that sets off alarmbells in my world.

Hope this helps someone.
If anyone has a better more accurate exit strategy please post
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  • #5
  • Feb 14, 2007 2:19pm Feb 14, 2007 2:19pm
Quoting mintjelly
I was discussing when to take profits with a fellow forum member. Here is my response to him. When do you take your profits?

Joel,

Here is my current game plan.

I am basing my current strategy on The Rule of 72. This rule states that if you divide an interest rate into the number 72 the result is how many time periods it will take to double your money. For example if you were making 6% interest per year your money would double every 12 years.

My plan is that if I can achieve 24% interest per month than my money will double every 3 months. So my goal is 24% per month. To break it down a little further....I need to only capture 5% profit 5 times during the month to hit my 24% target. So my profit target to trigger closing my positions, capturing my profit and then reallocating is 5%.

Last night at 8:00pm I opened a EUR/USD and USD/CHF trade in a demo account with $20K. I set the new Interbank FX EA for a trail target of $1000 and a trailing stop of $200. (So if my total profit hit or exceeded $1000 all my positions would automatically be closed when it dropped back $200 from the highest point)

In this case sometime prior to 6:11am this morning (2-14-07) my total profit hit $1434.06 and then dropped back $200 and the EA automatically closed all my positions at 6:11am with a profit of $1234.06 or 6.17%. When I went to bed last night my profit was -$435. This is very cool and I only need to do it 4 more times in the next 4 weeks to beat my goal of 24%.

The thing that had killed me in the past was greed and too much thinking. Now I have a definite game plan with a clear objective in mind for every trade. With the Interbank FX EA it does not matter if I am awake, asleep or in some other state of oblivion....my Forex trading is on autopilot and I sure sleep good at night!

Paul

nevermind the criticism, it's certainly possible to do 200% every three months. I've done it myself several times. What it means though, is you have to be much more sure of yourself than even the 5% who are succesful when it comes to placing trades. You have to be 100% completely confident, willing to almost bet your life on a trade. And after you're that confident in a trade, you have to have a very quick way of getting out if you're wrong. If you have those two things, you will become an excellent trader. Traders who trade with 2%, 3% or just 5% per trade know they can afford to lose a few trades, so they're more sloppy, and they'll trade when they're uncertain or just trade on hope. I think you should always be striving to be comfortable investing more and more of your account in each trade, because it will teach you to be more and more diligent, careful, and logical in your trading.

As for your plan, it sounds great. Just remember, a very good trader once said:

Don't think about what you'll do if the trade goes your way, because that's simple: you'll make money. Instead always be thinking about what you'll do if it doesn't go your way, because the secret to winning in forex is not to make money, but to keep from losing it.
  • #6
  • Feb 14, 2007 3:03pm Feb 14, 2007 3:03pm
Quoting aicccia
nevermind the criticism, it's certainly possible to do 200% every three months. I've done it myself several times. What it means though, is you have to be much more sure of yourself than even the 5% who are succesful when it comes to placing trades. You have to be 100% completely confident, willing to almost bet your life on a trade. And after you're that confident in a trade, you have to have a very quick way of getting out if you're wrong. If you have those two things, you will become an excellent trader. Traders who trade with 2%, 3% or just 5% per trade know they can afford to lose a few trades, so they're more sloppy, and they'll trade when they're uncertain or just trade on hope. I think you should always be striving to be comfortable investing more and more of your account in each trade, because it will teach you to be more and more diligent, careful, and logical in your trading.

As for your plan, it sounds great. Just remember, a very good trader once said:

Don't think about what you'll do if the trade goes your way, because that's simple: you'll make money. Instead always be thinking about what you'll do if it doesn't go your way, because the secret to winning in forex is not to make money, but to keep from losing it.
From what I read in your post your points consist of...

1. 200% return every 3 months is possible.
2. You need to have confidence to "bet" everything on a single trade in order to take trading more seriously.

No offense, you were probably well intentioned in your post, but you have given terrible advice.
  • #7
  • Feb 14, 2007 3:49pm Feb 14, 2007 3:49pm
Quoting aicccia
Traders who trade with 2%, 3% or just 5% per trade know they can afford to lose a few trades, so they're more sloppy, and they'll trade when they're uncertain or just trade on hope. I think you should always be striving to be comfortable investing more and more of your account in each trade, because it will teach you to be more and more diligent, careful, and logical in your trading.
i am completely shocked by this statement. It is almost offensive

Look, everything is possible like you said. But you ridicule conservative trading as if it's a weakness. Trading with low risk is what some people prefer over risking more on each trade. It keeps them relaxed and focused.

Every trade opportunity that comes is a unique occurance. You may have the edge, but edge does NOT guarantee successs of a trade. I think if you ask any PROFESSIONAL traders if they are 100% sure if the trade they just opened will be a winner or not, they would say 'i don't know'
  • #8
  • Feb 14, 2007 5:45pm Feb 14, 2007 5:45pm
Hmmm, interesting staff going on here. No offence to anyone but since that caught my attention let's see if I can give an example of putting a bigger position on the table by risking the same as you normally will on a sigle position, which will respectively double your profits.

 

  1. let's say you buy your postion at 100 ( purely hipothetical ) and your stop from MM prospective is at 50 bellow, hence your risk is 50 pips
  2. now let's assume you where right on both - time and price and the market advances 100 pips. your objective is still 100-150 pips away. then you buy another position at 200.
  3. your average open position now is 150. following your initial MM you move your stop to 125, risking again only 50 pips on the whole position.
  4. if the market continues to advance - good, if not - no big deal, you were willing to accept the loss in the first time if you were wrong.
  5. for the the purpose of the example let's let the market retrace 50%, which by rules is a healthy pullback. the key here is to sit tight and not panic. let the market do it's thing.
  6. after the pullback as the market resumes it's uptrend you buy another position on the break of 200, giving you average open position of 166.67. roll your stop either to break even or to 150, risking again only 50 pips. (I personally prefer moving the stop to break even this time because if my analysis is right after the pulback the market should not come down again but advance further )
  7. market make the anticipated move higher to 300 which is close to your objective and you take profit

Now let's summarize : 1st position - 200pips, 2nd - 100pips, 3rd - 100pips, giving total of 400 pips profit on a 200 chart pip move. And you only risked 50pips to begin with although you had a triple position.

And let's say 200 chart pips would've increased your account balance by 5%, your actual increase now is 10% due to the fact you had a bigger position. Of course your risk was the same as if having a smaller position.

Having said all that I'd like to point out that putting a bigger position doesn't necessarily mean you're out of you mind. The key is to positioned yourself properly.

  • #9
  • Feb 14, 2007 6:31pm Feb 14, 2007 6:31pm
Some good wisdom in this thread, I like the part about "secret to winning in forex is not to make money, but to keep from losing it" as well as the idea of "surviving a trade".

Here's my practical advice, and to the point:
keep the highest possible free margin, never trade with more than 10% of your balaance, and do the math how much you can afford to loose for all opened trades, at least 100 pips loss. After you take your profit, don't alter the ratio trade/free balance. Don't get excited of any quick profit,

Don't get confident in yourself!! Confidence is bullshit, I always had the biggest losses when I was most confident, talk about risky big trade vs. small surefire trade means nothing to me, you will never get rich with any of those, only waste of your time and ruining your health. Small pipstep+hedging+automated system, that's the future, yes!
"Everybody needs money. That's why they call it money" - Danny De Vito
  • #10
  • Feb 14, 2007 6:44pm Feb 14, 2007 6:44pm
Quoting mintjelly
Thanks Aiccia. No worries here.



I smooth out much of the swings by trading a fairly conservative hedging strategy. My main point of my post was to inquire as to how most people decide on when to take their profits. I am excited about the EA I am using to automatically close all my positions at profit goal. I am just hoping to incorporate some other ideas rather than just exit at 5% through trailing stops.

Cheers.
Mintjelly

I am interested in your hedging strategy.....I myself have been using hedging as an MM....
A good trader can make virtually any system work!!!!
  • #11
  • Feb 14, 2007 7:43pm Feb 14, 2007 7:43pm
Chriss I currently trade a hedge strategy with EUR/USD and USD/CHF. They have a tight negative correlation and this helps neutralize any wild swings. I trade on the IBFX platform and I am using a leverage of 400-1 and a margin of 15%. The higher leverage provides me a good swap rate and the margin is working well because it is a tightly hedged trade.

I trade a 1K lot size (100K using 2 decimal places). I opened a trade this morning going long EUR/USD for 6.65 lots and long USD/CHF for 7.00. My account size is $26,220 and at 15% margin I have $3412 in play.

I placed an EA that will monitor my overall profit with a trail target of $1100 and a $200 trailing stop.

I am currently -$183 on this trade and I will post the results for a few days and we will see where she goes.

I have attached a screen shot so you can see the actual trade.
Attached Image
  • #12
  • May 25, 2007 2:01pm May 25, 2007 2:01pm
could you please explain in more simple terms.
  • #13
  • May 25, 2007 3:27pm May 25, 2007 3:27pm
I personally risk a fixed 3% of my account per trade. I could see it being 5%, but I doubt IŽd ever increase it over that level.
  • #14
  • Last Post: May 25, 2007 4:15pm May 25, 2007 4:15pm
I use 5% per trade but risk only 2% with my stop loss. Preferably keeping my overall risk exposure to 6% (3 open trades), but sometimes will have 10% (5 trades open). I do realize this is what is considered an aggressive approach. One that should only be used with a high accuracy for a win/loss ratio. It's more then possible to make a good profit with money management while protecting your investment for long term gains.

Quoting mintjelly
I was discussing when to take profits with a fellow forum member. Here is my response to him. When do you take your profits?

Joel,

My plan is that if I can achieve 24% interest per month than my money will double every 3 months. So my goal is 24% per month. To break it down a little further....I need to only capture 5% profit 5 times during the month to hit my 24% target. So my profit target to trigger closing my positions, capturing my profit and then reallocating is 5%.

While I do think 200% in 3 months is possible. I really don't think it's the place or attitude you should start with. It's maybe an objective down the line (2-5 years in) you should shoot for. The first thing you should shoot for is consistent long term gains. While refining your approach to the market. Sure it sounds easy to gain 24% per month, it just doesn't always work that way, there a lot of other factors to consider.

As for the subject in question when to take profit. It's simple when you method tells you, generally for me if it's a trend then normally price action or a trend line will tell me my exit. If I'm swing trading on the lower time frame charts and I have a clear objective then it's usually some sort of support or resistance level (trendline, S/R pivot, MA or some other indicator. Although I do often re-evaluate my short term trades with price or other indicators if it's likely to shoot past I may change my target or if it's failing I may cut and run.
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