Today I’m answering questions I received from a beginner trader. Take this knowledge and use for your own needs.
“I am a beginner trader. Sometimes I have a mental blackout, i.e. when the market reaches my TP, I move it once and then a second time, but then the market backs off. What to do in such a situation?”
Start by taking the established TP. Don’t take more, greed is a bad advisor. The decision of where the TP and SL are should be made BEFORE taking a trade and should be based on the assumptions of the system. These things are not likely to be moved. Grab all the TPs that are there Occasionally there is a situation of an obvious opportunity to move the TP because the market has started rushing in a direction. But there is no point in complicating your life and taking a risk. Especially if you are an inexperienced trader.
It may happen that in the course of the trade the opposite signal appears. Then we simply exit the market. TP and SL is not something you have to wait for regardless of price movements. No. We manage the position all the time. Instead, we protect ourselves from greed and moving the TP. Take what the market gives you, don’t play around, because it stops being the system you have.
Totally agree. I believe it is one thing many new traders fail to do. They are so eager to get in a trade that they fail to establish what invalidates the trade and then also where to take profit. For me and the way I trade both are based on structure. Depending on the scope of the move I may elect to take a partial at a logical TP level but I don’t move that initial level.
Many traders are paranoid that once they have taken their profits by exiting the position, they will not be able to get back in and the opportunity to make additional profits is gone.
This is true in some trade entry set-ups but not when you are following a trend. When you exit a trend-following trade there is always a chance to get back in. Unless the trend has ended, but in that case you wouldn’t want to be in that market anyway. The longer the trend continues the more chances there are.
Another way to look at it is if your trade is 80% complete in profit and its Friday I’d close out as its a winning trade and swap fees or price gap could negativity impact your trade
One thing worth mentioning is that I find in my favourite strategy that if price moves 50 per cent of the distance to my stop-loss, then it always hits the stop.
The winning trades on the other hand hardly go negative at all, they go almost straight into the money and never look back.
Occasionally there is a situation of an obvious opportunity to move the TP because the market has started rushing in a direction. But there is no point in complicating your life and taking a risk. Especially if you are an inexperienced trader.