To set a TP or not to set a TP?

[ria_rose]

Thanks for this, Jimmy! Is the placement of your TP part of your overall strategy or does it vary per trade? I remember I used to trade HLHB and it already had a set rule when it comes to my TPs.

[ria_rose]

@MattyMoney

the spread will trigger it if it’s even remotely close, and poof, half of it is gone.

Actually yeah, that’s also a tricky factor that I didn’t really take into consideration. Thanks for that Matty!

[TheodoreThring]

@TheodoreThring

I have no FOMO and very rarely find runners anyway.

@ria_rose

I need that kind of control and mindset.

Flattering (thank you!) but maybe not altogether appropriate: to be honest, I wish I could find some runners regularly enough for my trade management to need to allow for them, but the reality is that I just can’t.

[MattyMoney]

@ria_rose

Actually yeah, that’s also a tricky factor that I didn’t really take into consideration. Thanks for that Matty!

You’re welcome, but it’s wrong, lol. This doesn’t apply to TP’s, only when you move your stop into profit. Sorry about that.

[pink_hat_trader]

@ria_rose

Does this count as 3 different trades

I don’t really know - I think of it as “1 trade,” myself. One of which a third might “run”, if I get lucky.

@ria_rose

do you also setup 3 different SLs for each one?

I don’t. All 3 “thirds” have the same stop loss. When the second part clears (hits its target) only then the stop loss jumps to breakeven (or within a pip of it) so it’s impossible to lose what I’ve already banked (apart from just possibly a very tiny bit of it).

I don’t do any of this trade management by hand, of course. That would be really hard. It’s all programmed in, in advance, in the ATM - “advanced trade management” - tool so that when I enter the trade (which I do manually - not using a bot or EA or anything like that!) it all happens without my needing to do any more.

@ria_rose

I feel like this is the first time I’ve heard of this approach

It’s a compromise, of course.

Sometimes it would be better to close everything earlier. Sometimes it would be better to let a bigger proportion run.

But you never know which. At least, I never know which. So it’s a compromise. I try not “totally” to miss out on a runner while also trying my best to bank some early profit quickly whenever I can.

I didn’t invent it! I stole it from “Mack,” the inventor of “Mack’s PATS” (price action trading system), but I’m pretty sure even he didn’t invent it, either and didn’t claim to. I think it was described in some old trading textbook from the 1980’s. Maybe even earlier - not sure.

[TheodoreThring]

@pink_hat_trader

I try not “totally” to miss out on a runner while also trying my best to bank some early profit quickly whenever I can.

This is exactly the objective of those systems. You get a smooth equity curve out of it, which makes position-sizing (most people’s downfall!) easier, but without giving up all your chance of occasionally catching the start of what might turn into a big trend.

So it’s for trend following.

And you have to have a proper, proven edge, otherwise it can turn a medium-to-poor system into an even worse one!

[John9517]

@ria_rose
I made a profit, but the price kept rising. I have seen people taking partial profits, using fixed targets, or adjusting based on market conditions. What’s your strategy?

[Dollar_McGavin]

@ria_rose

Helloooo! I feel like I’ve asked a similar question about Stop Losses. But recently, I hit my TP but I could’ve gotten so much more profits if I didn’t set one. I know greed is an enemy of traders at times But I just wanna know if you guys also set a TP for your trades. Is it part of your strategy and do you do it for all your trades, regardless of their potential?

Hi @ria_rose

Please forgive my comments if they sound harsh, it’s not my intention.

My observation is that struggling traders trade their rules & strategies while professional traders trade the markets. This is obvious when you listen to struggling traders, the number one topic talked about is strategy. Professional traders talk about nothing but the markets themselves, you’ll rarely hear them mention anything about strategy.

In other words, professional traders have a deep understanding of the markets, focus on market movements and are consistently profitable with or without a strategy. I personally haven’t heard of any professional trader that only has great strategies but no understanding of markets and market movements.

This is also clear when you watch struggling traders trade vs professionals. Struggling traders scan the markets and look for opportunities to take every possible setup because they don’t know when they will catch that big winner, essentially “blind” trading.

Professional traders, on the other hand, have already analyzed the markets and mapped out where the best (low risk = 1 / high reward = 10 or more) opportunities will be well in advance and wait for the price to come to them.

We can put this another way:

1. What did you assess the risk : reward potential of the opportunity before you decided to enter? What did you rate the opportunity to be, e.g. A+, B, C?
2. Suppose your assessment was that it was a C opportunity at best with only a 30% chance that price would even reach your TP, would you have taken the trade in the first place?
3. On the flip side, let’s suppose that your assessment was that it was an A+ opportunity with a 70% chance that price will run 3x further than your TP, would you still set your TP to where you did?

I struggled with this “TP or no TP” years ago, so I can definitely relate. In my case, it wasn’t about greed because my job is to squeeze as much profit out of a trade as safely possible. Nor was it about finding the “perfect” exit / scale out strategy. It was lack of analytical skills and understanding of the markets as well as its movements.

@Dollar_McGavin

IMO, the minimum skills a discretionary trader needs to learn is:

1. being able to assess and rank setups / potential opportunities, i.e. what does an A+ set up look like vs an average C set up vs a high risk setup that should be avoided
2. assess market conditions

When I was lacking these skills, I would blame losses on a faulty strategy and look for another strategy. In reality, I lost because I was trading “blindly” by taking risky / sub-optimal setups and/or trading in unsuitable market conditions.

In addition to my comments in the quote, I would add that I often exited too soon and left a lot of profits on the table because I failed to recognize how great the opportunity was and lacked the skills to analyze in advance how much potential the opportunity had.

Today, I can say for certain that for myself and the professional traders I know, analytical ability is very strongly correlated to profitability.