Multiple take profit levels

If my position size is 0.6. is it advised to separate the trade into 2 trades one 0.3 and the other 0.3 just to have different T.P levels?

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Its not so simple as that.

You might set two TP’s but the total position will initially have the same stop-loss price. So your capital loss stays the same, but by taking half the position off the table while the trade is still running you are making your winners smaller.

Your win rate will improve and you will be getting a better risk:reward ratio calculated by pips. But your account will not be growing as well as it should considering the risks you are taking.

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I see Thanks tommor Always coming through.

Agree with this. I see many other traders I know with several TP points along the way but I prefer to have a single TP. I will raise the SL when favourable to do so but nothing more. As tommor says doing multiple TP levels diminishes your RR level.

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Yes, it is always good to book some profits. Excellent morale booster. raise confidence, you become more sharp mentally, leading to better performance.

Advantage is that when price hit your 1st target and went into retracement, you have additional opportunity for re-entry with another position of 0.3 , so long your directional bias is correct, this is a way to boost winnings. Laborious but i think it is worth the time and effort.

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I prefer pyramiding to maximize my profits. I know some would say it is risky and of course it is if it is done without factoring risk management into place. Here is how I do it without compromising my risk management.

I take "trade A" from a daily key level if it meets my entry criteria and never place a target. I would then move my stop loss to break even when the market moves 1:1 in my favor. Technically, that means I do not have any risk exposure to my account. I would then wait for a pull back on a lower timeframe and re-enter the market (trade B),which will be the same amount as “A”, place my stop at the breakeven of the “trade A” and never place a target

When trade “B” move 1:1 in my favor, I move both SLs (A and B) to B’s break-even and repeat the same process again and again until the market takes out of all the positions on a SL that would be on the same level for all positions.

That way, I maximize the profit potential, risking the same % of my equity, even if I have 10 trades running at the same time. However, if you are going to use this trade management style, you need to have strict rules in place so that you do not leave a lot of profits on the table in the long run.

For example, I always close all other trades and leave the latest (which I then move SL to BE) when the market reaches a daily key level So for all my successful trades, there is always one that ends at break-even. The reason for this is that I would be preparing myself for a break-out so that I can repeat the same process again on the other side of the level in question.

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I normally split my position into two, close on at 1/1, and d other at 1/2…

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Many people do this. But instead of reducing the size of your winner, why don’t you add to it?

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Can you do an example of this with numbers in context? I’m intrigued.

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Me or @tommor?

Maybe I am reading you wrong because I have to say that I disagree with you on this topic.

Yes you are right saying that you are reducing the size of your winner by taking half off at a pre defined level. However that is only the case if the trade continues to move in your favour.

What if price goes to your first take profit level and then there is a pullback that perhaps is so strong that it takes out your stop loss??

If you failed to take some profit when you had the opportunity a winner has turned into a loser and I believe that is a cardinal sin. You should NEVER let a winning trade turn into a loser.

By locking is some profit at a predefined level if the trade then goes south you have at least reduced the amount you lost or you escape with a small profit.

Personally in that position I take profits at a certain level and if price continues in the right direction I let the rest run and I consider that as “icing on the cake and perhaps a cherry on the top.” However if price hits that first target but then there is a pullback I manage the trade so that if price returns to my entry I close that trade with a small profit and a break even trade.

Correct me if I am wrong.

Cheers

Blackduck

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Also, his cost of trade i.e the spreads and the commissions will be doubled which will lead to even fewer profits.

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Well you’re not inherently wrong but I believe the things we’re taught in trading are good in detail but weak in the wider perspective.

By this I mean there is endless detailed information on recognising formations, interpreting indicators, refining entry points, assessing support/resistance levels, etc. etc. These are important tactical skills that rely on accurate chart interpretation. I believe the emphasis in this area causes an unhealthy over-focus on entry patterns and individual trades. The result of that is an over-focus on improving win rate and maximising r:r. The effect of this is on a trading account can go one of 3 ways -

  1. get rich quick
  2. get rich slow
  3. go broke quick
  4. go broke slow

From the published statistics, most of us fall into groups 3 and 4. Probably the more tactically skilled traders survive to get into group 4: they don’t take excessive risk, they are careful and methodical in their TA and trade management, they thoroughly understand specific chart and candlestick patterns. Yet they don’t escape from the 90% failure rate.

I think we’re stuck with the obvious conclusion that if a trader does what most traders do, they will have the same outcome as most traders have - go broke slow.

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You paint a very grim picture and I guess for the 90% of traders who fail this maybe true.

I hope you are not including me in the “go broke slow” category as that would be disappointing.

I seriously believe that only fools attempt to get rich quick and would argue that most newbies that come and go like the days of the week are in the “get rich quick” category.

Me it is steady as she goes.

Cheers

Blackduck

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I actually think most traders are in the the 4th group, and “go broke slow”. Yes, the “get rich quick” merchants make a big splash when they arrive, but they might in reality be a tiny teenage male minority group.

Either way, it seems its just not possible to go from being a losing trader to being a winning trader just by greater accuracy at trading pin bars or engulfing patterns or what have you.

Something more fundamental is going wrong.

Its worth anyone having a look at the strategic guidance the Turtles got way back when. I don’t mean the Donchian entry signal, I mean their money management.

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The Turtles’ TA was simple and maybe not even particularly good, but the guidelines they followed really maximised their edge -

  1. wait for the break-out, but then take every entry signal
  2. set every trade at the standard maximum trade size
  3. use a stop-loss from ATR20 so that no trade can go more than 2% down
  4. pyramid the winners aggressively, dragging the stop-loss each time

No.1 just demands discipline. No.2 is tougher because it feels counter-intuitive. No.3 is the easiest to put into practice but even this is a test for many traders.

No.4 is the money-maker. When the Turtles set their stop-loss at r pips, they automatically pyramided with another trade of identical size every 0.25r pips. So when their trades reached entry + r pips, where many private retail traders today would be thinking about reducing position size from 1 standard trade to half a standard trade, they had just gone to 4 trades. That’s aggressive, but the principle is not wrong.

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Yes I am fully converse in the Way of The Turtle. Have read the book a few times.

I know a number of good traders that add to their positions as trades move in their favour and that is a very good strategy if you are totally confident that the trade will continue to run. It’s also flaunt with danger.

Personally I don’t. Myself and again a number of very good traders position size and then peel off lots or contracts using the same principle of moving stops to reduce risk.

I also know traders who will enter with say 5 contracts and peel off those contracts and once the price returns to a level that they know will hold will then re-enter again with 5 contracts.

So I think it is naive to think that only one way of trading is the only way to trade that will make you profitable.

Cheers

Blackduck

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I agree, most private retail traders, good traders, use the familiar method - move the stop to b/e and start taking profits out of a winning position as soon as it moves positive enough. The other side of this is that most traders keep the position running unless their stop-loss is hit: most do not use trailing stops.

But what most people do will bring the result that most people get. So when we see 90% of traders failing and being taken out of the game, its rational that we should look for the biggest common factors. It helps if we can find the biggest common factors which are at odds with what highly successful traders do. This leads to the conclusion that the usual practice - maintaining market exposure as losses increase and reducing market exposure as profits increase - is usually wrong.

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Here is an example:
Suppose for whatever reason, you buy GBPJPY at price X and your SL is 20pips away, risking 1%. When the pair rises 20 pips, you move your SL to X. This erases all the risk you had in the trade.
Since you are technically flat, you can place another trade. Wait for a pullback and then place another buy at price Y when the trend continues to the upside. Place SL at X (for example it maybe 25 pips but make sure you still risk the same 1%). So in essence, you have 2 trades running, but exposed to 1% risk.

When the trade moves 25 pips in your favor, move both SL from X to Y. This means that your trades are now risk free (under normal circumstances of course) and you have bagged 25 pips. When the market pulls back again, place another buy at price Z with SL at Y, risking 1%. Move all SLs to Z once the latest trade reaches 1:1. Repeat the same process over and over until the market tells you otherwise.
I hope it makes sense.

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I add to my positions all the time, but with a strict RM strategy, not to increase my exposure.
It all narrows down to one’s trading style

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