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Taking Partial Profits - Is it Profitable?

  • Poll

  • Is it Profitable to Take Partial Profits?
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  • Post #1
  • Quote
  • First Post: Edited Feb 20, 2011 4:20am Feb 15, 2011 3:23am | Edited Feb 20, 2011 4:20am
Hi,
Many successfull manual trader recommend partials,
and insists that partial profits are profitable!
Reasons to take:
1. DD% - it reduces drawdown
2. Losses# - it reduces losses
3. Risk - it reduces risk of time in market, and lower your exposure.
4. Psychological effect - it is like an insurance to gain profit,
it feels good, to put money in pocket, trader is more relax, and sleeps better.

But...
Many ea programers, with experience in automating trading
and testing... have come into conclusion that, partial profits are not profitable!
Reasons:
1. Average pips per trade - is increased , also expected payoff is increased
2. Reward- profit is increased. be patient. it will be worth on the long run
3. Be fair - Take partial profits only if you are willing to take partial losses when trade move against you
4. Backtesting proof- if backtesting results say that 100 pips gives best results,
why should i take partial profits after 20 pips?
It really just shows that the trader doesn't trust the strategy much at all and would rather rely on their 'gut.' . if you do backtest your strategy by an ea, and get an optimal target TP parameter. why to use partials?


want to hear your opinion. :-)
Don't forget to vote ^ above ^ :-)
  • Post #2
  • Quote
  • Edited 10:27am Feb 18, 2011 10:09am | Edited 10:27am
Quoting lolik2020
Hi,
Many successfull manual trader recommend to take partial profits...
but as a programer, with 3 yrs experience in automating trading
and testing...
i have come into conclusion that, partial profits are not profitable,
because if you do optimization on takeprofit parameter,
and results are that 100 pips gives best results for instance
why should i take partial profits after 20 pips?

want to hear your opinion.
you hear this crap a lot on this forum, cause most are manual traders with no intention nor experience of testing systems. And it is just their "belief" without any verification backing it up.

You are right, taking partials doesn't make sense.
Reminds me of how people scale in,,, if you think about how ridiculous this is.... Say you buy and it goes up a bit hen you buy some more... If you're willing to have that much risk on the table why not just trade that size to begin with?

By scaling in you have just averaged your overall price much higher than you initially bought.

Some might argue that you are limiting your risk to begin with by easing in for if it goes against you but I don't see how this justifies ruining the initial price you entered at to a much worse one through the average.

I've always been all in or all out, but that's just me
Time hides Nothing
Quoting CindyXXXX
Reminds me of how people scale in,,, if you think about how ridiculous this is.... Say you buy and it goes up a bit hen you buy some more... If you're willing to have that much risk on the table why not just trade that size to begin with?

By scaling in you have just averaged your overall price much higher than you initially bought.

Some might argue that you are limiting your risk to begin with by easing in for if it goes against you but I don't see how this justifies ruining the initial price you entered at to a much worse one through the average.

I've...
i'll also open my 'normal' position, but when i see strong movement in my direction i double up, same in trending conditions, when the trend continues i treat it as another signal and increase the whole position.

partial profit taking makes sense, when you've reached your profit target but have reason to believe your stop will not get hit, so you can trail stop and go in again when the trend continues. but i never scale out a losing position, either i believe it's a winner or not.
Invincibility lies in the defence, the possibility of victory in the attack
Quoting silverheat
i'll also open my 'normal' position, but when i see strong movement in my direction i double up, same in trending conditions, when the trend continues i treat it as another signal and increase the whole position.

partial profit taking makes sense, when you've reached your profit target but have reason to believe your stop will not get hit, so you can trail stop and go in again when the trend continues. but i never scale out a losing position, either i believe it's a winner or not.
I guess its a matter of what sort of method you're employing etc... Pyramiding is obviously the most profitable way to trade if you can do it properly but since the new leverage restrictions have come in this is not so easy...
Time hides Nothing
I've always hated the thought of taking partial profits and I've seen other traders take partial profits and I just cringe when I see it.

Now I don't blame them for doing it, knowing when to take profit is probably the most difficult aspect of trading, once you become profitable consistently.

Should I take profit now? Should I wait? What if price falls? What if I take profit and then it shoots through the roof and I leave money on the table?

Taking partial profit doesn't prevent this. It's like insurance.

I see a greater purpose for moving your stop to break even, and letting it ride on a free trade, than taking partials and losing your buying/selling power.
Now on the other hand if your trading a mass amount of lots and you have a lot of money in the trade, taking partials does make sense.
Quoting Revone
Now on the other hand if your trading a mass amount of lots and you have a lot of money in the trade, taking partials does make sense.
mass amount of lots: wont apply to anybody here, maybe this applies to a national bank. (no, we can't move the markets with our tiny positions, and yes a couple of hundred thousand or millions is still tiny in this market)

have a lot of money in the trade: if you mean compared to the account, then you are anyways doing something wrong.
Quoting Revone
I see a greater purpose for moving your stop to break even, and letting it ride on a free trade, than taking partials and losing your buying/selling power.
a breakeven trade is not a free trade since you were risking your initial stop. you should move your stop only to the position where you believe the trade is not good anymore, that may be at breakeven, but mostly even higher when the trade is a winner.
Invincibility lies in the defence, the possibility of victory in the attack
Quoting silverheat
a breakeven trade is not a free trade since you were risking your initial stop. you should move your stop only to the position where you believe the trade is not good anymore, that may be at breakeven, but mostly even higher when the trade is a winner.
Also just becasue a trade isn't closed you're running equity is technically an asset/ liability you hold all be it a static number. as soon as you open a second position you cut that assets potential in half (provided you doubled up), But of course with increased risk comes increased potential reward. Its a double edged sword
Time hides Nothing
Quoting CindyXXXX
Also just becasue a trade isn't closed you're running equity is technically an asset/ liability you hold all be it a static number. as soon as you open a second position you cut that assets potential in half (provided you doubled up), But of course with increased risk comes increased potential reward. Its a double edged sword
ok, but when you get another signal in your direction, and that can happen early in the move, it's not technically a double up, it's another trade, while trailing the former stop to the now new fail level. when the new trade won't work out, the old trade shouldn't be valid either then, even if it's in profit.
that doesn't mean pyramiding every trade is the way to go. but sometimes you'll get this stacking signals, often small-range breakouts in trend direction.
Invincibility lies in the defence, the possibility of victory in the attack
Quoting lolik2020
Hi,
Many successfull manual trader recommend to take partial profits...
but as a programer, with 3 yrs experience in automating trading
and testing...
i have come into conclusion that, partial profits are not profitable,
because if you do optimization on takeprofit parameter,
and results are that 100 pips gives best results for instance
why should i take partial profits after 20 pips?

want to hear your opinion.
You should only take partial profits if you are willing to take partial losses when the trade goes against you. If not, then to be profitable, you will need to be a much better trader than if you just wait for your target to hit. My suggestion is to spend time before and after the trade is entered to identify your second trade, rather than looking for the partial profit points.
Quoting silverheat
ok, but when you get another signal in your direction, and that can happen early in the move, it's not technically a double up, it's another trade, while trailing the former stop to the now new fail level. when the new trade won't work out, the old trade shouldn't be valid either then, even if it's in profit.
.

if you have unlimited leverage this plan is viable

Personally I max my leverage out at the start of each trade so I'd rather close the former and re enter in the latter
Time hides Nothing
Quoting CindyXXXX
if you have unlimited leverage this plan is viable

Personally I max my leverage out at the start of each trade so I'd rather close the former and re enter in the latter
lol, don't you know there is a middle between unlimited and maxed out leverage? well, here an argument for you, maybe there is an opportunity on another pair, while your open position is ranging.

another argument for partial profit taking are retraces or high volatility days, when you want to exit partially for the possibility of a better price or to lower your exposure but don't want to lose your whole position.
Invincibility lies in the defence, the possibility of victory in the attack
Quoting silverheat
lol, don't you know there is a middle between unlimited and maxed out leverage? well, here an argument for you, maybe there is an opportunity on another pair, while your open position is ranging.

another argument for partial profit taking are retraces or high volatility days, when you want to exit partially for the possibility of a better price or to lower your exposure but don't want to lose your whole position.
Yeah I guess,,, Not much of a middle ground now though with the new restrictions. I never maxed my leverage out with the old rules but 50:1 seems to fit me perfectly.

BTW in terms of trading different pairs etc... I guess we have different strategies is all I can say. I try and combine my entire position into a market wide view if that makes sense... And if something better comes along and my current position is going no where is usually a good sign I'm in the wrong market and so I will close and switch.
Time hides Nothing
Taking partial profits is useful to reduce drawdown.

There is good technique by PeterCrowns for partial profit taking. He suggested to close half of our position at 1:1 RRR and let the other half to aim big profit.

Moving SL to break even is not a good practice, imo. We should only move SL after new S/R is formed. Moving SL to open price means moving SL to the middle of S/R. So, partial taking profit is better.
  • Post #17
  • Quote
  • Edited 1:51pm Feb 18, 2011 1:33pm | Edited 1:51pm
I think if you have been trading for a significant amount of time, you would not have a problem taking partial profits. When a trader is in a trade, his exit point is probably the same exit point that every other trader in the world is gunning for. Therefore, I get out early because there is always that possibility that my target will not be met fully. I've been in at least a dozen or so trades where I missed the ultimate target by less than a pip. At this point, I really don't care about the ultimate target....I have nothing to prove by holding out for the "ultimate" target....I just want to beat other traders to the punch so I can exit profitably at a higher probability. Just yesterday, I made very decent profit on EURAUD and got out w/in 20 pips of the "ultimate" target.....Had I waited for the ultimate target I would have gotten rocked this morning as the EURAUD spiked on comments.

P.S. - On second thought, I just realized that the original post may have been referring to the notion "scaling out" out of positions as way of taking partial profits. I admire traders who can do that.....I just don't have the patience to take partial profits in that manner. More power to those who do it on a regular basis.
Quoting Custos
haha, children not allowed on the forum
really?

I think its only children posting these days.

The whole subject of trade management is so much discretionary that i cant even imagine saying a word about it, let alone announcing the winners out loud.

I mean how could u know how the people who are taking partial profit,.. trade, how much they trade with, what kinda stops they are using, how much risk each time they take, what times frames they trade, what are their goals, how much experience they have and the list goes on.......

so if u have back tested thousand of systems, with many ways to place the stops, with calculating ur risk with each approach used by traders, with different account sizes and again the list goes on.........

than u can come back here and tell my grandchildren what u found out. But until than keep from giving verdict about others cause it does not makes sense to you.

Thanks.

P.S not directed specifically at OP or others posters.
.
Quoting nasir.khan
really?

I think its only children posting these days.

The whole subject of trade management is so much discretionary that i cant even imagine saying a word about it, let alone announcing the winners out loud.

I mean how could u know how the people who are taking partial profit,.. trade, how much they trade with, what kinda stops they are using, how much risk each time they take, what times frames they trade, what are their goals, how much experience they have and the list goes on.......

so if u have back tested thousand of systems, with...
well said, this was a similar feeling i had the whole time i was reading this thread. for scalpers like me, there are always places where you know there will be selling but not complete turnaround selling, however at these positions you dont know how much selling there will be, you get out of a portion where you know selling will occur, you look at the magnitude of said selling and you get back in at a lower price accordingly and move on with your trade.

thats my scalpers point of view but there are so many ways of looking at it.
I'm not sure how many will react to this but for my opinion, taking "partial profits" is a legitimate practice. Speaking only for myself, I like to try and ride a trend as far as I possibly can. I also try to enter any given movement as early as possible so as to exploit the trend as much as possible.

Of course this leads to some very obvious predicaments. As I cannot know the future I never know if any given moment or signal will produce a reversal or continuation...no one knows until its too late to really do anything about it.

Thus, when any particular trade has advanced to a predetermined point, I take partial profits and bring my stop up to eliminate any further risk. This way if the trade moves against me I have made profits. If the trade does NOT move against me I hold until it does. With each new wave in my trade's direction I can lock in further profits by trailing my stop...not matter what happens I make money...

Why not hold with ALL my lots? Because I never know if any given position will continue or not, and while I have the chance I take at least some profit. (minimum 1%) and eliminate risk. It seems foolish to watch a decent profit evaporate to nothing or even take a loss just because I wanted more...yet when the market does give more it seems equally foolish NOT to take advantage of this instead of waiting on the sidelines for the next "opportunity" when I was already in the move and got out too soon. Taking partial profits or "scaling out" as I call it, allows me to do both.

Admittedly this is a trend follower's strategy and is most successful on larger time frames. For those that trade nano tick charts I don't know if this would work but cannot see why it wouldn't. Its really a matter of perspective.

In answer to the original question: "Is it profitable?" I answer a resounding, "YES! it is extremely profitable."
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