Posts: 1,036 since May 2012
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I did some quick number crunching with my stats spreadsheet and I think i've just answered my own question. I only have data from 50 live trades to work with, but it never the less gave a pretty clear picture. Part of my stats include the following:- Initial Stop
- Profit Target
- MFE
- 1st part MFE Captured (ie: the profit banked for the first part of the position)
I used this information to do 3 calculations:- First I calculated the actual MFE captured
- Then I calculated what the total would have been if I had taken profit at 1*Risk ie: if the MFE is greater than my stop, then set the MFE captured to the stop size
- Lastly I calculated what the total would have been if I had taken profit at my profit target with no wiggle room to squeeze out a few extra points ie: if the MFE is greater than my target, then set the MFE captured to the target size
The results were incredibly clear:
-The worst option is what im currently doing ie: giving price a bit of room once the target is reached in the hopes that it goes a bit further
- The 2nd best option is to take profit as soon as price reaches 1*Risk
- The best option is to take profit as soon as price reaches my profit target ie: dont give it any extra room, just enter the profit target into the market.
Taking profit as soon as my profit target is reached is over 200% more profitable!
This is also no doubt dependent on how good you are at setting reasonable profit targets based on your strategy and market activity. But I think based on the results from 50 trades im going to start entering my profit target into the market.
I would however still like to hear from anyone else on this subject...
Diversification is the only free lunch |
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