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Taking Profits Early
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Taking Profits Early

  #11 (permalink)
Elite Member
Atlanta, Georgia
 
Futures Experience: Beginner
Platform: MBT Nav Pro/TOS
Broker/Data: MB Trading
Favorite Futures: TF
 
westgawolf's Avatar
 
Posts: 18 since May 2011
Thanks: 13 given, 12 received


Private Banker View Post
This is a common occurrence among newer traders. Let me ask you the following:
- Do you have a daily goal of some sort? Example, monetary amount or just X number of trades that fit within your system.
- If you have a daily goal, what is this based on?
- As Mike mentioned, What are you risking per trade? 1:1?
- How are you entering and exiting your positions? Limit orders via OCO?
- What chart(s) interval are you using when trading?
- What is your entry and exit criteria? (If you want to share that)

I ask these questions because this may be the root of your problem. Are your daily goals attainable with the number of contracts you trading and risk to reward you are using? We know TF will move far beyond 5 ticks on a valid move. The issue is are you attempting to trade the noise in between the day's measured moves? If you are just getting 5 ticks filled and the market quickly reverses, you're trading the noise. When you have a target of 5 ticks and the market goes at least 10, you're most likely in a measured move. This obviously leads to what your set up is and what chart interval are you using. A small/short chart interval will provide many set ups typically but many are head fakes or areas of indecision. This leads to over trading. Remember, the more trades you take throughout the day, the more risk you are assuming and the more commissions you are paying both having an adverse effect on your account equity. Be sure you are using an adequately sized chart setting but be sure to pay attention to the big picture for the over all trend, etc. Also, be mindful of your risk to reward ratio. A 1:1 will have you against the wall at all times. 2:1 will at least provide you with an advantage over what you are risking and allow you to recoup a previous loss and be in the positive. And lastly, one way to stay in your position without taking profit too early is to utilize an OCO where either your target is filled and cancels your stop or you get stopped out and your target order is canceled. Maybe look away while your trade is on for a while to prevent your emotions from affecting your trade. The absolute worst thing that is going to happen is you're entry was wrong and you get stopped out. You then simply analyze what went wrong and wait for price to move somewhere else before looking for your next entry. It's simple but not easy.

Cheers,
PB

Here are some answers to your questions. I hope they help to provide better guidance.

1&2) I don't set any daily goals as far as a profit target or a certain number of trades. I just take my setups when the market gives them to me. Some days the market might give me 10+ and others might only give 2-3. I think my only real daily goal is making sure I follow my rules to the letter and take every valid setup without hesitation. Patience and discipline aren't a problem for me. I can wait 10 min or 4 hrs if I have to to get my setup, and if all my rules aren't met for entry, then I simply don't trade. For me it's just that simple.

3) I am risking 1:1 on each trade.

4) I enter and exit all my trades via limit order, with one exception. I have a time limit for getting out of a trade if either my stop or target isn't hit. I use a market order for those.

5) I use a 5 min chart exclusively.

6) In general terms, my entries are based on a 20ema and the force index. I only make with trend trades, and I have rules for when a valid trend is established to keep me out of a sideways or rangebound market. Exits are just based on 5 ticks from my executed entry price (sometimes I get a better fill, and base my exit on that and not my original entry price).

Let me know if any other info would be helpful to improve my trading.

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  #12 (permalink)
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La Jolla, CA
 
Futures Experience: Master
Platform: Sierra Chart, X_Trader Pro, OptionsCity
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westgawolf View Post
Here are some answers to your questions. I hope they help to provide better guidance.

1&2) I don't set any daily goals as far as a profit target or a certain number of trades. I just take my setups when the market gives them to me. Some days the market might give me 10+ and others might only give 2-3. I think my only real daily goal is making sure I follow my rules to the letter and take every valid setup without hesitation. Patience and discipline aren't a problem for me. I can wait 10 min or 4 hrs if I have to to get my setup, and if all my rules aren't met for entry, then I simply don't trade. For me it's just that simple.

3) I am risking 1:1 on each trade.

4) I enter and exit all my trades via limit order, with one exception. I have a time limit for getting out of a trade if either my stop or target isn't hit. I use a market order for those.

5) I use a 5 min chart exclusively.

6) In general terms, my entries are based on a 20ema and the force index. I only make with trend trades, and I have rules for when a valid trend is established to keep me out of a sideways or rangebound market. Exits are just based on 5 ticks from my executed entry price (sometimes I get a better fill, and base my exit on that and not my original entry price).

Let me know if any other info would be helpful to improve my trading.

OK, thank you for clarifying. Here are some thoughts for consideration.

1&2. Look to establish some sort of daily goal for yourself. You need a process in place that measures your success and allows a sense of accomplishment. It sounds like you are very disciplined in waiting for your set up which is excellent so maybe set some sort of monetary or tick per day/week goal. For example, look to end the day net positive 20 ticks and/or net positive 100 ticks for the week. At the end of each day, record your results and measure them against your goal. Determine a suitable reward for yourself such as adding another contract once your account grows to whatever level in turn giving yourself a raise.

3. Make an effort to skew your reward to a more advantageous level. Start with at least 1.5:1 but preferably 2:1 to start. I know why many fall victim to this however. It's a psychological hurdle of watching your trade and worrying on whether or not the trade will work out. All you want to happen is to have your target filled as quickly as possible so the worrying can end. You can overcome this, it just takes some confidence building. Let's say you're risking 10 ticks with a reward amount of 20 ticks and you take a loss first trade on the day. You're now down 10 ticks. Your next trade results in you reaching your 20 tick target leaving you positive 10 ticks (gross). You take one more and it's a winner, you're now up 30 ticks/contract on the day (gross). It's a numbers game at the end of the day but the trick is to have your targets exceed your risk allowing you to come back out of any losses. If trading multiple contracts, have your first target equal to your risk to allow your remaining position become a risk-free trade and provide you with piece of mind knowing you can sit back and wait for your target to get filled. Also, make sure your targets are in areas that make sense. Taking a long into the vwap with your target on the other side could be problematic for example.

4. With your trades being limit orders, are you able to have them as OCO's as well? As for the time limit rule, that's your preference of course but I don't know that this provides any advantage as some moves take time to develop. This may fall back into the psychological hurdle area. Just a thought.

5&6. If this works for you, then continue using this. I think simplicity when starting out is the best choice. There's absolutely no need to attempt to trade a complicated system. But I would recommend keeping an eye on the big picture. Also, it appears you've developed a system that works on the 5 minute, have you looked at any different types of charts to compliment your entry and exits? For example, in my own trading, I use the 5 minute in addition to a few other big picture charts to identify trend and potential entries and then bring that idea down to a range bar chart. Time based charts offer unique price patterns that you do not see on tick and range bar charts but the advantage of tick and range bars allow you to get the most out of a move by using moving averages and/or other indicators such as a MACD (which I use). This allows you to see potential changes in trend such as divergences, etc. Of course, they are viewable on a 5 minute but sometimes a bit more difficult to identify right away. As for the Force Index indicator, I'm not familiar with it really but if it works for you keep it going.

To make yourself a better trader, only you can accomplish this. But it will come from utilizing an advantageous money management system coupled with a repetitive process of following your rules and staying in your trades while utilizing a system that has proven to provide consistent profitable trades. It's a lot easier said then done but it's not impossible.

Hope this helps, feel free to ask anymore questions. I'm happy to help.

Cheers,
PB

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