When Is The Best Time To Take Profit?

When Is The Best Time To Take Profit?
My experience is that if a trade begins to lose a lot of it's accumulated P/L and you close it, you lose the entire Unrealized profit. How can one close a losing trade without losing the Unrealized profit?

You can't turn a losing position into wining position. However, you only could turn a losing position into winning trade, by applying averaging down solution. Close all the position once is breakeven. What i would do is i would not make it breakeven, but i will close the 2nd position at reasonable earning price, and leave the 1st position open and repeat the same. Unless, the movement is out of my expected zone (As i know well how the price move), then i will close the losing position and start new again. In the long run, you will be survived. Thanks.

The best way I've found to "know" when to take profit is to do a thorough study of your last 100 trades. Go over each one and log the maximum profit potential that existed before it turned against you (you will need to define what that means). Then tally up all the trades that went 1x risk, 2x risk, 3x risk, etc. Look for the bell curve distribution of profit potential and set a hard limit order along with your findings. You will always find trades that don't make it to your limit and trades that go far beyond it, but if you continue to track your results and adjust the limit accordingly you will be able to dial it in within 500 to 1000 trades. As long as you profit is greater than 1.5x risk you will make money.

You need to look at the swing in the market and it depends on how much it is although it always varies on some curriencies it can be a 800 pip swing so id take the profit at 800 pips although this is easier said than done if i make say 300 pips i may take the profit before i go to bed

The best time to take profit is when the bankers are collecting everybody else Stop Losses, which is their prime Daily objective...

what time frame are you trading? you could drop down to a lower time frame and scalp against your position until the trend continues... if you are even trend trading.

Area's I take profit.

Take some profit at first area of resistance/support (it may not break though)
Take some profit just prior to a market open. London, Asian, and USA sessions (if your in a London trade take some profit before usa open)
Take profit at weekend gap fills.
Take profit at liquidity gap fills, (thin quick spikes are liquidity gap) treat them like a weekend gap.
Take profit on unexpected quick unexpected spikes ( spikes are highly likely to retrace very quickly)
Take some profit before a major data release.

I like this suggestion because I have regretted not taking profit at those points. What I still need some insight on, is how to lock in my unrealized profits. It takes 24 to 72 hours before the unrealized profit is credited to a trader's account.

not sure what "unrealized profits" are, my profits show up instantly in my balance. No 24 hour waiting period, for me its instant. Might call your broker about that one..

I dont't have the unrealized profit problem with my live FXCM portfolios. I see it only with Thinkorswim, Trade King Forex, OANDA, and Forex.com accounts. The unrealized or open or floating P/L apparently represents unreconciled profit, which is usually lost if a position is closed the same day it was placed. Thank you bloodpoodle for helping me clear that confusion. I will remember your profit taking technique whenever I switch from swing to day day trading.

You could use a fixed Tp based on reward to risk, 2:1, 3:1 etc
then you don't have to think about it.
only make sure there is nothing blocking the road, resistance or support.
in that case you take profit a few pips before you get there.

Can you please expatiate on rewards and risks and obstacles? I don't want to assume I understand exactly what you are saying. Thanks.

Ok, this is going to be a long post,
because there is other things you need to understand before you can grasp the reward to risk.

I don't know how long you have been trading, so this will be at beginner level,

first you should understand how the way the market moves.

if price go up, you will see higher highs and higher lows,
if it go down, you will see lower highs and lower lows

this is how a normal market behaves,
and this is also a how we can predict the next move and protect our capital.

let's say price is moving up, with higher highs and higher lows,
if for some reason, the market will stop to make this pattern.
you would want to get out because then the direction has changed,
it has changed from being Up to sideways or to down,

any time you have a brake of this pattern, the up move is usually over,
so that is why you should have your stop loss below a higher low in an up move, ( if you bought)
and below a lower high in a down move, ( if you sold)

this is the best placement of a stop loss because it is protected,
what do I mean with protected? well, a lower high in a down move,
is resistance, that is why it has bounced from that level previously,
so if price would come up there again,

your stop loss is protected behind sellers,
they will sell and make it extremely hard for the buyers to stop you out.
and if price stops to make this pattern of higher highs or lower lows,
it shows you right there, price is not going in your direction any more
so you would want to get out there.

alright , so when you are about to sell or buy,
you need to take a note of these previous levels,
look left on your chart, where is the previous highs and lows = support resistance,
where did price bounced before?

each one of them is a potential hinder in your way.
which one can be best used for protection?
to put your stop loss behind or below?

when you decided that,
how far away are they from your stop loss?

for example, if you want to buy, and you plan to put your stop loss below the previous low for a low risk entry,
then what you should do is take a measurement from the entry to the stop loss,
this is your total risk in the market, plus commissions and spread of course,
you do this by dragging the pointer on the chart in mt4

now, you should plan get at least 2 times that distance in reward to your risk if your trade is successful.
then you will measure the distance to the closest resistance level above your entry.
that distance should be more than 2 times your risk, this will give you a 2:1 reward to risk ratio.

because this is an area you want to avoid, there is a high probability price will again bounce there.
you should take profit a few pips before reaching there.

you should make sure that this distance is at least as big as your risk distance,
so you would get at least the same about in reward as you are risking,
anything less than that, you avoid the trade.

you can do this with a modified fibonacci tool or with boxes.

it is not advisable to trade with 1:1 reward to risk unless you have a trading system with a very high win percentage,
it would be ok if you win 70% or more of the times. which you probably don't
so makes sure you get at least 2 times or more in reward.

so this is a long explanation how you measure reward to risk,
I hope this is helpful.

it is all we can do because no one knows how far the price will go after your entry,
it really is up to the market, after entry, we have no control,
the only things we can control is our risk.
but if we did this procedure each trade,
then at least we have done what we can to make the odds for this happening as large as possible.
and also the smaller risk to be stopped out.

Thank you Roughtrader for this reply. It is a very helpful post even for experienced traders. Could you add some charts to illustrate stop loss placement 2:1 risk ratio? Thanks.

this will illustrate it I hope

@mecrandie this is probably the hardest decision to make, trust your gut.

Miitarymonk,
I like your hybrid portfolio performance. Can you share your strategy?

Thank you rough trader. The charts are very helpful.

This is a very rational approach. Thanks.

@mecrandie at this moment my strategy is still on test drive, I may share the system once I have at least 3 years of distribution rate. Other than that, it feels like a gamble to me at this moment.