Entering trades is really easy, closing them when they go against me is also easy for me. But I’m really struggling when it comes to trades that are going my way. I don’t know where to close them. I close a trade, and then it keeps going my way. I want to learn something that’s more practical than a simple RR ratio. Any suggestions please?
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In my opinion, there is no exact answer to this question. This time you take profit early and then the trade keeps running in your favor. The next day you try to hold and it went half way in you favor then suddenly against you. The easiest way to settle this is to pre-planned your exit. Once you have a bit more experience then only go with fully discretion type of exit style.
There is a saying that you need to exit based on how you play Blackjack and I think it make sense at some point. As your cards get folded, you need to decide whether you need to doubling up your position size or just giving up on it entirely and don’t take excessive risk cards that have lower chance to win. To me, your ultimate goal for money management should be like this. But, in order to achieve this, you must build your own playbook first.
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-Next support/resistance level
-Trailing stop
-ATR Multiplier
-Round Numbers
I personally use a simple RR. Backtest some and figure out whats an optimal TP level that’s hit more often than not.
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Agreed. Exit should be preplanned before you enter. Really lowers variance in the trading method.
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I guess after reading Tom Hougaard’s book I’m struggling with the exit. He says you never know how much the market is going to give you and therefore having a fixed risk/reward ratio doesn’t work for him. I know everyone’s different and I’m trying to find my way of dealing with this issue.
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Where to exit a profitable trade is the hardest question in trading.
Obviously everything depends on strategy but in general ambitious r:r ratios of 1:2 or better do not produce consistent profit.
A high r:r is just delaying the decision point - it is unlikely price will reach the TP, leaving price wandering about with a profit available, but the TP decision based on r:r prevents the trader from taking it.
Get your profit. Make a decision.
If your TA says a pull-back is now more probable than continuation, take the profit immediately and look to repeat the trade asap.
If your TA says price will go further but without a pull-back, then add to your position - but now you are momentum-trading, chasing price: this isn’t necessarily wrong but it’s a totally different strategy than the one you started with.
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You’re right. It really is the hardest question in trading.
Is there a book dedicated only to how/where/when to take profit?
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Each strategy type will have different exits, and some exit type will depend on your needs. There is one solution, test it.
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Questions that require answers that may vary, because many things influence the decision to exit/close a trade. Please adjust it to your trading type, for example scalping, day trading, or long term trading. I gave an answer based on experience only, that I will exit the market when I have made a profit. I often scalp on GBPUSD. The close decision is taken when the market shows signs of reversal.
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How about close a % of the profitable trade as profit, let the rest run with a trailing stop? You get some locked-in profit, and you still get the opportunity of a runner. Trailing stop will minimize any lost profit.
Fixed RR hasn’t worked for me. Fixed SL and TPs across any trade hasn’t worked for me either. You need to just trade and get comfortable with your strategy. Early on I would lock-in more profit.
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Icebear2’s advice is correct. Think of your trading journey as a series of step achievements. When starting out, most people paper trade so that they can get comfortable with the mechanical actions required to trade - entry, exit, etc. If you follow good advice (like the Babypips education course) you will be able to summarize that the first goal should be to learn how not to lose money. Before you can build up this confidence, it is recommended to set automatic exit points, whether automated as a sell order, or if you are trading live, by executing a sell order when your pre-calculated TP point has been reached. If with that planning you can demonstrate a positive edge, then you can tinker around the edges of laddering in, laddering out, selling 1/4, 1/2, etc as a method of improving your edge. I hope this has been of some use.
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I suggest you use support and resistant zones to enable you to place your T/P with at least an understanding of order flow affecting price action movement.
For example.you are trading a buying trend movement that at some point will hit a resistance zone where losing traders close their trades and thus order flows are less. That is where your T/P has maxed out until order flows are cheaper to buy at some point where winning trades could continue.
But beware that the order flow could take an about turn and the price action significantly drops instead…
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Set up trailing stops to lock in those profits but still let your profits run. Just keep an eye on stuff like moving averages to adjust on the go.
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My mentor is teaching me to have entries and exits pre-planned via price action, bias, session time, LTAs, and Support and Resistance. Also consider average pip movement per session & fundamentals (news). Ultimately, I will take the win and go out. I will not trade into Support or Resistance. But, I have the subsequent entries already planned should the move continue beyond Resistance or retrace. Lock in your profits and be ready for next move - whatever the market tells you.
He does have methods for runners but I will cross that bridge…
When you say “average pip movement”, do you mean ATR? And when you say “per session”, how many units of ATR is that for someone who is using M1 as their time frame?
I don’t know how useful ATR/average pip movement is on M1. M1 average can vary greatly from 15 minute period to an hour. However, I don’t do M1 so I don’t know - never considered that method, ergo, don’t know how to apply ATR to it. For myself, I use longer session times - NY morning session, NY pre-open, etc.
Maybe from my thinking you can DYOR/extrapolate - Simple example with made up numbers:
New York morning session 8am-12pm moves 100 pips on average with no news and my pair has already moved 80 pips. I see a bullish entry and there’s no resistance for another 50 pips. While I will take the entry & follow price action first, I’ll have that average at the back of my mind. Can it go 50 pips and more? Of course. But I will be more conservative/cautious. It’s just another item for consideration.
Is it okay to post a YouTube video in forums? Not trying to shill for the guy but it’s the method I like. Or you can DM me and I’ll share that way.
I think it’s okay to share YouTube links. Would like to watch what you have to share. Thank you.
Tried dm’ing you as the rules appear to be hazy on sharing these links. It says you are not receiving dm’s at this time.