How do you manage a profitable trade which has not yet hit your target?

Hi,

After years of losing money with indicators, I have now realised that price action is the most important thing in trading. However, one thing I am unsure of at the moment is if you are in a trade and you have a target which is around 4:1 R/R, but your trade just missed the target and comes back down to your entry price, how would you manage this? Do you take partial profits along the way, trail the stop loss below the swing low’s/high’s, or continue waiting for your target to get hit and risk getting stopped out with a full position? Or is every trade treated differently?

Thanks for your help!

This is a really, really good question, and a big weakness for many traders.

The answer is simple in theory; just look at what the markets are telling you and react accordingly. If your indicators and the price action are telling you that this is just a bit of noise, then hold the line. If it is instead telling you that this is or could plausibly be a genuine reversal, then close out your position while you are still in profit. Easy, right?

In practice, though, this is very difficult to do, largely because of our personal psychologies. As Mark Douglas explains very clearly in Trading in the Zone (which I highly recommend), most of us see what we want to see, and filter out all the information that conflicts with our desires. Training ourselves to be truly objective is something that nearly all traders will have to do in order to be consistently successful.

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For example, if you are bullish and you see that the price can’t hit your target and the market trend changes - go out of the position, but if the trend remains the same but you observe just retracement don’t worry since the direction you trade remains right

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I Understand.

Ok, well everyone has a different view on this as to what’s THE RIGHT THING TO DO .

some people don’t use stop loss at all - i would highly advise against this

Another method is - Close enough is good enough, Meaning if you are 5 pips away from your goal, Manually close the trade.- THERE IS A VALID POINT HERE and 5 pips may not be a big deal if you have R/R of 4:1

Another Method is let it run all the way - I agree with this, Because YOU MUST HAVE A TRADE PLAN and you must follow that plan

What i personally do is i follow risk management . I Like to set a Move to break Even As quick as possible.
The Reason is…
Let’s say a trade goes in my favour by around 20 pips,
i will then set a Stop loss to be 1 pip in profit
now if the Stop gets hit, and accounting for spread, i’m 1 - 4 pips away from my original entry price, which i can set anyway
and you’ll probably find most times that if you are patient, your Take Profit will get hit anyway.
but if your stop gets hit you don’t lose anyway

Now. if you want to debate that a Larger profit could have been achieved
YEAH. OK
there are 2 points here and it really depends on the person individually as to whether they care about the few pips so… CLOSE ENOUGH IS GOOD ENOUGH
or will they execute their plan no matter what

but in my opinion, before any money comes into it or profit SAFETY AND RISK MANAGEMENT IS ABOVE ALL.
if you can’t protect yourself from loss, you can’t even think about a win

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I use set and forget strategy, means I don’t close any trade manually! I always wait for the result, either it’s TP or SL.

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That may be part of the reason you so frequently give people shockingly bad advice here, without knowing what you’re talking about.

I don’t manage a trade at all once it has opened. At that time my SL is set but as a trend-follower I don’t set an order to close at TP. The SL is set at a level which is the first price at which I could say the trend is now broken. So whatever price does without hitting the SL, the trend remains. I don’t ever move the SL.

If you are trend-following and set a SL at a price where the trend is still intact but you will be exited from the trade, the SL is in the wrong place.

Though I don’t set a TP, I pyramid the original trade as soon as it breaks even and aim to do that repeatedly as the trend advances. When I get a pyramid trade in place, then I do move the SL on the original trade ahead so my capital risk is never increased.

If you don’t follow trends but rather use a reversal pattern like head-and-shoulders, you will find that these generally have a price limit after which they have lost their “influence”. But why waste your time on something like that?

Hello,

It is a very good question. You have made the right move by focusing on price action. Personally, I do not use profit targets. PT s imply that I know where the market is going and that I can predict the future. I let the markets tell me when the trade is over. Here is my technique.

I monitor two things. One is a trend line drawn on the time frame that I entered on. I draw the trend line from swing level to swing level. Any breach of the trend line on close of the bar is an exit signal. The other is to monitor the trade on a lower time frame. When price forms a channel and begins to consilidate I either move my stop to breakeven or exit. Which one is a bit of a judgment call. If price breaks thru the channel in the wrong direction its an immediate exit.

I use both of these techiques simultaneously and always with a protective stop. One thing worth mentioning is this. If I exit due to a channel formation on the lower TF I do watch for a re-entry just in case it was only a retracement.

If my trade is going to profit , it is not necessary that I should get my target too. I should remain contented on reasonable profits. All the time it will not be profitable. I will try to gain my sure profits not wait for more one. I can close it before hitting TP I set before .

How do you determine what a reasonable profit is?

LauChoKun, do you turn profit overall? If you do, I like your plan.

I actually follow this way of trading since I don’t lose my momentum in the mid way! Yes, now I am improving my trading performance gradually!

that’s right if you are sure the price won’t go further to the target you should close a trade

Respectfully, i have another point of view and i must disagree with your answer.

because

  1. how can he be sure ?

  2. he should have planned the trade before he placed it , if there was a time to be sure, that was the time.
    Now. if he miss planned the trade, then he should pay the price

  3. as for paying the price.
    I BELIEVE instead of manually closing the trade
    why doesn’t he put a stop loss that is say 15 or 20 pips below the current price, but ABOVE HIS ENTRY PRICE (Assuming he was Buying)

that way, he has the option to wait and see if it goes up and hits the Take Profit
or if it goes down to hit the Stop Loss

a) he pays the price of not planning correctly and hopefully learns
b) he doesn’t actually take a loss, but Makes less

this is what i would advice

for example, if you are bullish and the trend changes, it makes no sense to maintain your position since the probability of going further to hit your target is low.