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What is the best way to work out your profit target?
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What is the best way to work out your profit target?

  #1 (permalink)
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What is the best way to work out your profit target?

Hello Guys

I have been trading for about a year now. I have come to a place where I do like my system and I believe it's very profitable. There is one thing however, I am having real difficulties with profit taking. I can sometimes hold a profitable position for a while just to see it all disappear. Sometimes I will bank the profit but find a way to erode it with another trade. What is the best way to keep profits? Should I have a money amount as a target so I stop trading for the day or the session? Whilst a money amount seems crude, looking back that will have been profitable. I do want to focus on the trade but at the same time I think I have to be defensive with growing my capital. Any ideas and suggestions will be welcome.

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  #2 (permalink)
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I struggle with the same issue too. Yesterday, I watched a trade go from +14 only to get out at BE. And it's not the end of the world but it sure is frustrating to let those profits slip out of my hands.

My problem with that particular trade was that I entered with only 1 contract. Although I hoped to grab another at a better price that price was never reached and left me riding just a single contract. So now I was placed in a box I didn't want to be in. It was "All or None" on this single contract.

Being in a strong downtrend I hoped to picked up 20 pips from the trade. This preconceived number is what did me in.

I became married to the magic number of 20 even as I watched the profits erode. Had I been thinking more clearly I'd let the market make my exit decision for me. Simply watching for a bar to close above the previous bar would have told me to get out. That little run down was showing signs of weakness by that close and I missed that important signal. I missed it because I was married to the number of 20.

So I need to become more robotic and less emotional in my trading. Doing so would have gotten me +8 on that particular trade.

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  #3 (permalink)
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Try adding targets. Split the lot size over multiple targets. NT's ATM lets you handle 3 targets with a single click for entries.

So if you're trading 4 lots, maybe do 2 to target 1, 1 to target 2, and 1 to target 3, for instance. Stagger the targets a bit. If you're currently doing AIAO at say 16 ticks, then maybe target 1 is 12 ticks, target 2 is 16 ticks, and target 3 is 24 ticks.

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  #4 (permalink)
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Imvho a robust methodology should be applicable to exits as well as entries. So for example if you enter at support based on 'bullish' price action aim to get out at resistance or on 'bearish' price action. Of course some things better lend themselves to providing an inherent target geometry based approaches for example (trend lines, channels, fibs, some gann stuff etc.)

I think (again imho) that it is a mistake to use risk or RR as a basis for stops and/or targets. Market structure or methodology should dictate stops, targets and trade management,size should be used to control risk and if the RR is not good enough pass on the trade.

One thing is for sure many traders seem to devote far too much energy on entries and neglect the other (arguably more important) stuff. For most traders its tougher being disciplined with a position open without the extra pressure of not knowing exactly how yor are going to manage the trade.

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  #5 (permalink)
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I agree with Nick. I was trying to propose something simple (that you perhaps already considered) without changing your entire method, since you say it is working.

But personally, I set my targets and stops based on price action. I use trendlines and key s/r areas like pivots and weekly high/low, prior day high/low. Sometimes the market is volatile and I'm able to target 50-75 ticks on my runner, sometimes the market is range bound and I have to adjust it to only 20-24 ticks.

Mike

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  #6 (permalink)
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If you are after specific ideas perhaps you could tell us a bit more about how you trade and maybe people might have some ideas for targets. Of course trailing a stop is a possibility too.

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  #7 (permalink)
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pyekorn - One of the methods are this indicator volume stop v2 in download area can help to identify the stop for exits/targets. we still have to manage these manually.
Exits are big struggle for beginners as we can only do one contract to start with, so the options are limited. when we go to >2 targets, then it is more flexible like Mike explained

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  #8 (permalink)
Big game hunter
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I agree with both of you . The best trades Ive made are the ones that were well thought out and the exit is established before pulling the trigger . Markets go through phases where the volatility is different than it was in the past for whatever reason and a quick look at what its mood is lately can help you establish a logical target for right now .

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  #9 (permalink)
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Personally, I treat it like a poker game. Once I'm in a trade I must use my skills to exit as the winds of change dictate.

Using Ninja's ATM, my stop and target stops appear automatically upon entry. I then adjust my stop according to my rules. Next, I move my target far away from the current price range. Then the poker playing begins.

At this point Rule #1 is to take my hand off the mouse. I don't want to get caught making some knee jerk reaction to a temporary market blip. Once my poker playing skills tell me it's time to think about exiting, I'll take another second or two to review all the data before me. If I'm still convinced that it is time to exit then I simply hit the "close" button. I don't worry about missing a tick or two and getting that perfect fill. When it's time to go, just go.

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  #10 (permalink)
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hondo69 View Post

Once my poker playing skills tell me it's time to think about exiting, I'll take another second or two to review all the data before me. If I'm still convinced that it is time to exit then I simply hit the "close" button.

Could you write down those rules so that another trader could exit in the same place? Have you written down those rules so you can exit consistently? If not how do you tell that you are being disciplined and following the rules?

Forgive me (the new boy) playing devils advocate.

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