Take profit when buying - what's the rationale?

Jagoda01 2018-02-14 09:39:30 UTC #1

Guys, I know it will be a silly question, to which the answer must be really obvious. For some reason, I’m struggling with the concept of “take profit” when buying. I understand the need to set the “Stop Loss”, but how can I make a profit on buying? I’d have thought I can only make a profit when selling? Help please!!! I’m using Meta Trader4.

tommor 2018-02-14 10:09:00 UTC #2

In simple terms, when we open a trade by saying “buy” or “sell” its nothing to do with a physical asset. So it isn’t like buying a car which you drive home and then later have to sell to someone else in order to put money in the bank.

If you think the value of the car is going to rise you buy or go long. But you’re not buying the actual car, you never take delivery of it, you’re just betting on a price rise. To close that position you “sell” and you put the difference between the two prices in the bank.

Same when you sell in trading, just in reverse. If you think the price will fall you can place a bet that the price will go down - you’ll be selling or going short or shorting. When you want to close that trade, you “buy”. Still, no goods changed hands, just profit (or loss!).

Martin_K 2018-02-14 11:37:10 UTC #3

hehe
OK, I’LL HUMOUR THIS

Step 1. if you go to the fruit shop and BUY and Apple for $1

Step 2. you go to your friends house and you SELL the apple to him for $2

You have TAKEN a PROFIT of $1

Now… When you buy the Apple, YOU ONLY HAVE 1 THING… the apple

when you trade you have 2 things, because it’s A CURRENCY PAIR… PAIR is the keyword.

ok,
so what if you go to the fruit shop and you buy an apple for $1
and you go to your friends house and he also when to the fruit shop and bought an orange for $2

so the PAIR is Apple/Orange compare to say EUR/USD

so… you SELL your apple to him
IN EXCHANGE FOR …HIS ORANGE

YOU ARE ESSENTIALLY BUYING THE ORANGE

or. you could say you are BUYING the orange at the same time as you are SELLING the apple

the point is…
Your apple is worth $1
you swapped it for an orange that is worth $2

so… YOU TOOK PROFIT of $1 on the BUYING OF THE ORANGE

so, even though you did sell the apple, you didn’t profit on the apple
you profited on the orange, WITHOUT THE ORANGE THERE IS NO PROFIT
if there was a banana worth $1 and you did the same thing, you don’t make profit

so. without the $2 Orange you don’t have profit
so… You profited on the orange
GET IT

now in trading take EUR USD
When you BUY OR SELL, you are defining two things
DIRECTION and WHAT YOU ARE DOING TO THE BASE CURRENCY

if you are BUYING
you are BUYING EUR

if you are SELLING
you are SELLING EUR

and whatever you do to the base, you are doing the opposite to the other one

so HOW DO YOU TAKE PROFIT ON A BUY OF EUR/USD

well… if you bought EUR/USD at a price of 1.0000
and Sold it at 1.0010 you have made a profit

and remember this
WHENEVER YOU OPEN A BUY TRADE, IT CLOSES AS A SELL TRADE
WHENEVER YOU OPEN A SELL TRADE IT CLOSES AS A BUY TRADE

TAKE PROFIT can be made on both SELL or BUY trade
TAKE PROFIT is either the name of the line that is hit or IT’S AN ACTION THAT IS USED TO DECRIBE YOU MAKING A PROFIT

all you need to remember really is … if you are entering a Buy trade, you will Exit it with a Sell

Whether the Sell is
MANUALLY EXITING
STOP LOSS
OR TAKE PROFIT
it’s a sell

if you start with a sell you will end with a buy

simple as that
does that make sense

Jagoda01 2018-02-14 14:57:14 UTC #4

Thank you both very much for making it clearer for me. It certainly helps!

In terms of technical execution though, how do I go about making the profit by going long?

I know I have to set the parameters for the sale first, click on the sale and then the record appears in the Trades tab. Do I now close the existing record by buying?? Or do I open a new record and buy?

I know, I will hopefully be laughing soon at my own questions, it’s just a very painful teething stage…

Martin_K 2018-02-14 15:18:21 UTC #5

there is a little cross all they way to far right side of the records… click that cross and you close the trade
or
you can right click on the record and select CLOSE TRADE

i’m seriously starting to question whether trading is for you

No you won’t
You’ll probably shoot yourself for asking these questions

my FIRST DAY on MT-4, i got on a demo and work out how to
Place a Trade
close a Trade
it took like 5 mins to figure out

why have you not done that

Jagoda01 2018-02-14 16:03:06 UTC #6

Congratulations Martin. And thanx for your reply. Frankly, I’m just at the elementary stage of the course. I’ve just seen the Meta Trade platform is covered much later on, so assuming I haven’t gone through the material which would have helped me in executing the trades. I also set up an account and executed a few “blind” trades yesterday. All I needed was the rationale first, and also a bit of technical pointers. I had closed the trades using the X button on the right but this seemed just too easy, hence was wondering whether I was simply doing it wrong. And just for the record, I have seen the History tab too. Thank you for all your input.

Martin_K 2018-02-14 16:36:17 UTC #7

You’re Welcome

i was at the Kindergarten stage when i figured this out

LOOK MATE, I HAVE SOME IMMEDIATE HOMEWORK FOR YOU OK

i want you to play with MT-4 NOW…
Open a Demo account with $10,000 so that it will last you longer than 30mins before you blow it all.
Learn to create a PROFILE and to Delete it and Learn what it is
Learnt to create a TEMPLATE and to delete it and what it is
Learn when the installation files are kept in MT-4
know where the following folders are and what they are for

EXPERTS
INDICATORS
PROFILES
TEMPLATES
SCRIPTS
MQL4

find 2 ways to open a trade
Find 2 ways to close a trade
When you have a trade open, LEARN TO SET THE TAKE PROFIT
When you have a trade open LEARN TO SET THE STOP LOSS
Now learn that YOU CAN DRAG THE STOP LOSS AND TAKE PROFIT LINES… PRACTICE THIS
and
Learn what ONE CLICK TRADING IS
learn to add an indicator
learn to delete an indicator
learn what the indicator list is
find 2 ways to delete indicators
Learn about the OBJECTS LIST
have a look through PROPERTIES when you right click on a chart
learn to change the time scale
learn how to use the zoom function
learn how to find the ACCOUNT HISTORY
also learn how to save a report and detailed report
learn how to set an alert
learn how to add a chart and remove a chart
Learn how to delete an account that you have logged into but that has expired

lastly
LEARN HOW TO INSTALL MULTIPLE INSTANCES OF MT-4

if you cannot accomplish ALL OF THESE TASKS, YOU CANNOT TRADE

let me know when it’s done
and the point of this exercise is , YOU CANNOT ASK FOR HELP, YOU HAVE TO RESEARCH ON YOUR OWN … that’s the point

so… don’t cheat
speak soon

Jagoda01 2018-02-14 16:45:26 UTC #8

Thank you for all the constructive words Martin, they are just what this Forum should be all about. Participating in the forum is a part of a research you are indeed doing on your own. Whoever feels like chipping in, does it, but there is no obligation - that’s the beauty of it. Wishing you all the success on your trading journey!

Martin_K 2018-02-14 16:53:40 UTC #9

hehe That’s funny.

thanks mate, and i know you mean well,
but, you should understand that i no longer need to be wished success because i already have it hehe

i’ve already succeeded at forex
but thank you nonetheless , i know what you meant to say

i will instead Wish you well ON YOUR JOURNEY and i hope that one day you can say the same to me.
keep learning mate and experimenting

Jagoda01 2018-02-14 16:57:14 UTC #10

Brilliant approach, mate, and again good luck!

Martin_K 2018-02-14 17:00:59 UTC #11

it’s not an approach, but again… thank you

FerdousAzam 2018-02-18 05:10:22 UTC #12

Have you ever physically exchanged currency. Suppose you want to travel a different country. You need to exchange your currency with that foreign country currency. What will you do? You will give (sell) your currency and take (buy) that currency and vice versa when you back home and need to exchange. So in every transaction you are buying one currency and selling other currency.

imbest 2018-02-18 16:42:35 UTC #13

Forex trading is different from physical exchange of currency . Here you trade virtually not deal with physical assets. We invest real money , trade through broker Market goes ups and down in between one need to find his profits, Forex can give profit on both sides not just in high moves we can earn too in low positions.

Logan_Gabriel 2018-02-19 00:51:59 UTC #14

Mate you need to practice a lot. In forex trading one can make profit from buying or selling currencies. When you are buying any currency, while you going to sell that currency with some profit margin you can make money. Now, you need to analyze the marker for buying currencies. Because there are many currencies all over the world. But you need to buy rising currency not falling one. To understand the market demand of the currency you need to different type of analysis.

forexcrisp 2018-02-26 03:21:22 UTC #15

In every transaction of money there is buy or sell. In forex trading too we buy one currency against other currency while trading with currencies. But good thing we can get profit on both side when open position on sell or buy one can get profit if his analysis and forecast is right. He need not to wait high market for take profits he can get this also in down positions when open to sell side.

Mike18 2018-02-26 14:39:10 UTC #16

To understand the way you get your profit you need to compare everything with a more simple example. Your example with apples is really the one that explains the whole thing, we just don’t deal with physical currency in forex, if I can put it so.

Derix 2018-03-03 07:16:39 UTC #17

“Take profit when buying” can happen when you are already in a “short” or sell position in that trade. When you feel that a particular stock/commodity/currency is going to crash, I go “short” or sell it through a variety of instruments even if I don’t own it. Once the price actually crashes, I “book” profit by buying. J