Hello again traders–captgrumpy here with some additional material -part of Part 2
USING A TAKE PROFIT FACTOR
There was no mention of using TAKE PROFIT setting --mainly to keep the plan as simple as possible.Using the take profit adds another small step to the trading routine,but I think as every trade
is opened there should be a take profit price set up.To make the setting of the TP more consistant I
made up a table for setting the TP based on the chart increment at time of the trade–chart increments
can go anywhere from 5 to 500±-the larger the increment the larger the take profit setting-also it is
possible to have 2 or more TP’s hit during a long run so the size of the TP may be lowered with each
successive trade–see table below:
Suggested Take profit settings based on the chart increment at time of trade
Increment X a No TP Setting TP Price = (purchase Pr.
Increment TP1 TP2 TP3 + or - TP setting)
5 8 = 40 40 30 _______ (+/-) ___________
10 7 = 70 70 50 ________(+/-) ___________
20 6 = 120 120 100 ________(+/-) ___________
50 5 = 250 250 150 ________(+/-) ___________
100 4 = 400 400 300 _______ (+/-) ____________
200 3 = 600 600 400 _______(+/-) ____________
500 2 = 1000 1000 600 _______(+/-) ____________
1000 1.5 = 1500 1200 800 (+/-)______
Trading routine with the TP—When a trade is opened set up a TP --follow chart lines until either the
take profit or the PTP (potential trade point) is hit–if tet PTP was hit first normal trading (open trade
closed–new trade opened in new chart direction)is done—if it was the TP that was hit–the trade is
automatically closed (active trading)–you now have 2 choices–depending on where on the run the TP
occured–1st if the TP ocured at what you think may be close to the end of the run-do nothing–just
follow the chart lines to the next PTP to open a new trade --2nd if the TP ocured at what you think is
only part way on the run and it may continue further–you have 2 more choices to make–1…as before
do nothing–wait for the next PTP to open a new trade OR 2…you can open a new trade in the same
direction as the just closed trade at the current price–set up a new TP and follow chart lines until
either the new TP or the PTP is hit–take action accordingly !There could be 2 or more TP’s hit before
the PTP is hit.
STOP LOSS FACTOR
The use of a stop loss setting also has not been mentioned in the Plan–again it was to keep the plan
as simple as possible–the proper use of a stop loss setting is an art unto itself !Most traders always
set up stop loss for every new trade,but there are a few brave souls who claim they never use a stop
loss.By trial and error you may be able to use stop loss settings properly–I would suggest you get some
professional help on the web or from experienced traders.For swing trades you have to set the stop loss
higher than for day trades.The way this plan is set up as soon as the chart STARTS to go the wrong
way after a trade is opened, the open trade is closed ASAP to limit any losses, so I don’t set up a stop
loss unless I am going to be away from the computer for an extended time.Using a stop loss also adds
an extra step to the trading routine—trading routine with both the take profit and a stop loss:
open a trade as usual at a PTP–set up the take profit and the stop loss–follow the chart lines until
either the SL,TP ot PTP is hit-- it is the stop loss that is hit first the trade is closed so follow the
chart lines to the next PTP to open a new trade–if it was the take profit that was hit first–the trade
is automatically closed and you carry out the procedure fo take profit as written above—if it is the PTP
that was hit first the trades are done routinely --don’t forget to set up new TP and SL for the new trades
that will be opened.
NEVER CARRY A LOSING TRADE
This is a good time to issue this warning–Never Carry A Losing Trade in the hopes it may bounce back,
close the danged thing,take your (smaller controled )loss and move on!!
Also a reminder that with this plan if the chart STARTS going in the wrong direction the open trade is
closed and the chart lines followed to the next PTP to open a trade and continue trading.
THE ONE EXCEPTION TO THE ABOVE
The only time losing open trade may be carried for a while is—If you are on a good run With Some
Potential Built Up Profit(PBUP)and a chart reversal is hit–you can always close he open trade or if you think
the reversal may just be a short one and the chart may then continue on it’s run you could hold off
any trades for a while to see if the chart will continue it’s original run–you could wait as long as about
3/4 of the PBUP is gone before you should close the trade while there is still a bit of profit left… This
way you won’t have much profit,but you also don’t have any loss …and if the chart does continue it’s
run you could have a nice payoff
These items were not sent with Part 2 ,but should have been–I hope some of you have taken the time
to read Parts 1 and 2 on previous posts–I would welcome comments… The next post willbe the
complete financial plan, likely tomorrow (Tues)