On Take Profit

Greeting, seasoned traders!

I have a question.
It is said that one can/ should use take profit at 1x stop loss, or better. Let's say one has three choices: 1:1, 1:2 and 1:3.
The question is when and how s/he should choose each one of those choices?

Thanks.

Find out who said it, find out if they are rich. Most likely not. There are too many unknown variables. But if it's completely random entries. Go the 1:1. at least the law of large numbers will keep you at 50%.

Up to you, and depend market it self

Your profit target depends on a number of factors. This is a decision you would make when creating your trading system depending on where you are looking to take profit. This can only be established upon extensive testing.

Up until two hours ago I didn't fully grasp when profit should be taken either. With the help of a very nice user on here I do now and what I can say is it depends on the system you are trading specifically. I am new just like you and often need things specifically explained too me in great depth however I don't feel I should be giving this advice but from what I see 1:2 is not always the best for certain systems. I'm sure there is a more experienced trader on here who can help you better than I can.

I would say you should be aiming to get at least 1:1 but there will be trades with potential to hit 1:10, its a judgement call that you need to make while taking into account the evolving market conditions.

It would be silly to systematically take profits at 1:1 just because it hits 1:1, you should be always reassessing the potential risk reward and adjust accordingly.

Offcourse it should be at least 1:1, any less would mean youre risking more then you stand to gain. Thats just setting yourself up for failure, but you should steer clear of using fixed r:r ratios.
Define clear rules in youre tradingplan for setting targets and stoplosses based on market conditions.

completely agree start at a minimum of 1:1 then adjust stops and target profit accordingly!

Oh really, than I should make a deposit of $5000 to start trading with the required margin to start trading.

I think youre confusing risk to reward with leverage ratios

Hello surekobai,

I can only speak for myself. I don't ever close a position if the market is giving me money, I open a position in the direction of the trend and let my winners run until the trend reverses.

My strategy has a rather low winning % but in the long term I always end up in the green due to the few large profitable trades. (I trade 4h and daily charts).


Take care, -Ryosuke

Truth is not all trades will produce that type of ration. You cannot take what the market is not giving. One of the most professional ways to set Take Profit is some pips below a Resistance in a Bullish trend or some pips above the support in the Bearish trend. Another approach is to use Fibonacci

trading using trading conditions were absolutely maximum will be very beneficial for us, for which we need to take advantage of good trading conditions of the broker in order to provide maximum trading results.

I just started out so take all i say with a truck load of salt.

Personally i came to the conclusion that any formula like go for a 3 - 1 and leave your tps/stops there limits your potential profitability. Now that does not mean that a trading system utilizing these cant be profitable.
Point being no one can predict the market long term what if you place a tp and a sl look at the chart again half an hour later and see another signal or a stronger signal?
In that case its best i assume to micro manage your open position to fit your new pedicition.
Which brings me to the next points:
Its a ton of work but im trying to micro manage each of my orders as if any action i take is a new position, i recheck and reevaluate my positions religiously in a 15 minute interval reason being: i hate spreads and i hate opening new positions because that means i have to pay spreads which means i give cash to my broker and im not too fond of that idea .

Make your prediction -> open your trade -> make a new prediction -> adjust current trade -> make new prediction -> adjus current trade -> ........ -> make new prediction -> close trade.
Now of course i cant have great read on the market every 15 minutes so i abide by the rule that if i dont have a predicition going against my current position then position stays open with an adjusted stop loss.

This can help you save trades which go bad (yesterday i had that problem where the trade went 170points against me ... i checked the chart had a great signal and adjusted my stoploss to 240 i ended up closing only 30.

Rigid systems are great in stable market conditions and require less work but adapting to what you see and reading PA constantly can save you in unstable market conditions.

What does it mean to close a position and take profits? It means you assume that youve reached the end of the current / swing / trend / movement and the market will move against you it seems irrational to me to close a position just because youve reached the 100 point barrier when you think theres another 100 ahead.

I can't tell for certainty that when I get out the price would revert back against me washing away all my profit or the other way around. But there's a way to tell beforehand. But know that its never for sure.

Say you sold at the first arrow but where should you take profit ?

Well an area I would be looking to take profit and where I assume price might start to go against me is support (notice that I sold on a downtrend but on 30min chart it was an uptrend), the yellow dash where price started bouncing up after a double bottom where I put the second arrow below it also happened to be a 200ema on my 30min chart. I knew this was the last support on a strong uptrend that if it didn't hold if would go back further. But knowing that the rest of the MAs gave way to the downtrend (or a reversal) I knew this support was going to hold the price for a while. The yellow dash line is a fib 61.8 level which coincides with the 200ema on 30min. No surprise after the double bottom price started going up, well into London. You want to do the same with resistance.

I hope that helps.

PS: These kind of questions have been asked many times, and also been explained in great detail and depth by the experienced traders. You should be looking into Traders Discussion.

usage trading lot is better tailored to the capabilities that exist so they can get a profit-making is not forced, to reproduce the experience that we can continue to add capabilities with a lot of margin also adjusted

trading by studying many things in the demo account will allow us to more easily in the tarding in real account, as most already know and understand how to work with both trading and profits, it could be more accurate

yeah thats true, speaking of TPs I guess its more of a case to case basis, might be based on trading style, trading targets etc, I try to avoid the word maximizing. as much as possible keep it with in a safe positive distance. thats it..

Best answer anyone will ever give u right here... Risk:reward ratios are for understanding the profitability of a system after the fact.. a way to measure how well the system works when applied to the actual market... In trading you never set a take profit .. you simply enter and control your risk then develop profit taking parameters that allow you to capture what the market allows you to capture.. it will be different every time... At the end of 100 trades figure out how much on average you risk for how much on average you Gained and at what accuracy to understand the profitability of the entire system.

the risk of problems we certainly things that must be considered in carrying out forex trading business, and we can determine to be our stop loss limit in order not to overload the risk will occur.