Basically I have a very small trading account, and am relatively still a noob. So when I see a trade making me 100 pounds in profit in just a few hours i get very excited. what i normally do is exit the trade with the profit that im happy with then re-enter the same markets again with a tighter trailing stop and sometimes a tighter stop, because in my mind id rather take my 100 pound profit, and enter again since the markets appear to be moving in my favor, if the trend continues, yay, im still in and if im stopped out its not too bad as I wont loose as much and ive already made a profit that im content with. Because of my small account I really cant let the market “breathe” or move against me much because of the relatively tight stops I need to keep to ensure I dont lose an amount that im not willing to lose, any opinions on this will be appreciated.
In my opinion it’s more a money management thing that an actual strategy.
As long as Your analysis is correct, then this money management technique should keep you safe but also will cut a bit of your profits. But don’t worry it also cuts your losses short - which is pretty important to every type of trader.
Hey lethalr53,
I sometimes have the same problem. I get out of a position and then get tempted to get back in with the same direction and size. What i do to counter this is ask myself “if i get out of this position, will i be taking trades on the other side anytime soon?” If my answer is no, i usually stay longer. Also, what pairs are you trading? I personally like yen pairs and the thing with them is that they need bigger breathing space as they are often volatile. 20-30 pips is usually my SL for day trading targets.
Closing the trade to go right back in at the same level accomplishes nothing more than giving a few pips to your broker. Just tighten the stop and let it ride.
I understand that point, i intially enter a trade its with a looser stop than when i go in again, so if the market moves against me If im making a 100 profit with a looser stop for some “breathing” , it will eat more of my profits than if i have re entered again and have a tigher stop . but if it doesnt move against me, then it will ride out and ill make decent profits again.
I usually use this method on most of the markets which i believe the trend will continue in my favour , otherwise I would not re-enter , but when I re-enter the market again its more cautious as I expect the trend to continue but if it doesnt, because of the cautious approach, i find that I dont make large losses, for example, it was the AUDJPY pair that I was short in earlier, one moment I was checking my profits at 60 gbp , i went to get a snack and when i got back , it had dropped a massive amount of pips and my profits were looking good. ive done a good few trades and have never seen a pair that im in drop so much so quickly, no idea what happened. Since then i have re-entered the market again , it seems to be bouncing around going back and forth at the moment, but im still making a small profit and have a trailing stop on incase things swing up.
I think i started doing this because of the small account size , what may be breathing room for other traders would stop me out completely, for example I remember times where I was making a good profit, and decided to let my profits grow since the market was moving in my favour, only to later get stopped out because the market reversed a bit, the worst part is seeing the market go back in your favour after a small reversal but you are already stopped out on that trade, so i guess now i take what im happy with, get back in more cautious, if it continues the trend, awesome, if it goes the other way, my stop will ensure that a small amount will be lost and its a loss that I can handle.
and i know i can just tighten stops on the intial trade but i prefer to close out an amount im satisfied with for the day and re enter again where i can still make profits again but have less to lose.
So you have two lots with the same entry point for the position? One with a tighter stop than the other?
From your posts, I sense that you are under funded & over leveraged ie. you are trading position sizes too large for your account balance. I may be wrong but your opening sentence in this thread screams that to me (as does other statements). It immediately sent alarm bells of for me & it’s a sure-fire road to ruin.
As for the closing of your trade & the opening of another one: it’s all just counter productive. As has been stated already, all you are actually doing is paying money to your broker. So your first trade bags you £100 & then you re-enter with a tighter stop & let’s say that you actually get stopped-out for -£20. Why not just tighten you initial stop on the first trade to lock in £80 of profit? It has the same desired effect except that you are only paying the spread to the broker once instead of twice. Your method honestly makes no sense what so ever.
Your exit also seems to be money-based as opposed to a signal from the chart (resistance level or a price action signal); then you re-enter in the hope that the trend will continue & it’s just that, “a hope” as opposed to a well concluded hypothesis deducted from your analysis of the pair. I think with this entry/exit approach & the fact that you are risking too much of your account per trade is going to bring you a cropper & your account is going to be blown. No-one wants a margin call so I would advise to tone down the position size & do a HEAP more reading & learning. I know it’s not what you wanted to hear but I assure you, it’s seriously good advice. You have completed the BabyPips School - yeah?
Its a good method, whats good in it is that you secure you profit first and then re-enter market risking some percentage of your profits and not your capital.
I have heard people say stuff like "I will double my money and then withdraw all the original deposit to trade with the winnings only." This makes no sense to me. Why not compound your earnings? Why start all over?
So would “risking some percentage of your profits and not your capital” go as follows?
Risk only 50% of combined earnings:
Trade 1 profit $10.
Trade 2 risk $5 profit $5.
Trade 3 risk $7.5 profit $10.
Trade 4 risk $12.5 profit $15
Trade 5 risk $20 profit $1
etc…
The truth is that you are more likely to:
Trade 1 loss $10… (Now what? You have no profits to trade and you are down.)
OK, Trade 1 loss $10
Trade 2 risk $5 profit $4.
Trade 3 risk $7 profit $8.
Now you are up $2. Risk $1?
Show me an algorithm that risks only a portion of profits and no “capital” and makes sense. I can’t come up with one. I am always looking at position sizing strategies.
I have heard people say stuff like "I will double my money and then withdraw all the original deposit to trade with the winnings only." This makes no sense to me. Why not compound your earnings? Why start all over?
So would “risking some percentage of your profits and not your capital” go as follows?
Risk only 50% of combined earnings:
Trade 1 profit $10.
Trade 2 risk $5 profit $5.
Trade 3 risk $7.5 profit $10.
Trade 4 risk $12.5 profit $15
Trade 5 risk $20 profit $1
etc…
The truth is that you are more likely to:
Trade 1 loss $10… (Now what? You have no profits to trade and you are down.)
OK, Trade 1 loss $10
Trade 2 risk $5 profit $4.
Trade 3 risk $7 profit $8.
Now you are up $2. Risk $1?
Show me an algorithm that risks only a portion of profits and no “capital” and makes sense. I can’t come up with one. I am always looking at position sizing strategies.
I aggree with arbitrager, no sense in paying the broker twice. If you get to 100 gps, and think you will get more, just put your stop loss at 80gps and see if it goes higher, the higher you get, adjust your sl accordingly.