How to learn to take profit?

[LeeD]

I recently found out that the most common trading mistake I am making is not taking profits.

Maybe it's summer-time effect... but I see more often than not that the price hits my entry price, often a few times, before heading for my target.

Had I taken profit at the nearest resistance level and re-opened at the last trade's entry price (assuming the signal is still valid), I would have a few trades with a small profit... Instead I often wait long enough for the trade to revert from substantial profit, which is a couple of ticks away from my target, to the stop.

Is there something I can improve? Are you using any technique to take profits more consistently?

 

[1765hillwood]

I had the problem of selling too fast, my soultion was to take half at a low target, another half at second and final sale/stop at thrid target or a breakdown in strategy. So if it was 1000 shares, 400 or 500 at 1.5 times the stop, leave stop a same level, next sale at 2 times stop 200-300 shares, move stop to break even, final sale of 200-300 at thrid target or move stop there. At the end of day my avg per shares is 20-30% higher, I'll be first to admit not a perfect system, but hey I've got bills to pay.

 

[otcstockfund]

always scale out at resistance levels, sometimes it sucks when a few times in a row it continues rocking, but dollar wise your acct will thank you over time

 

[trendo]

Quote from 1765hillwood:

I had the problem of selling too fast, my soultion was to take half at a low target, another half at second and final sale/stop at thrid target or a breakdown in strategy.

You take half off and you do it three times? Reminds me of a Yogi Berra quote, ""Baseball is ninety percent mental. The other half is physical."

 

[deaddog]

Quote from LeeD:

I recently found out that the most common trading mistake I am making is not taking profits.


Is there something I can improve? Are you using any technique to take profits more consistently?

Depends on your system.
Win rate, Risk/ reward ratio, etc.etc.

When you say not taking ptofits are you hitting your target and not closing the trade hoping for more or are you getting half way to the target and seeing the trade reverse?

Is the problem the strategy or the trader?

 

[1765hillwood]

half of 1000 is 500, half of 500 is 250 etc

 

[PocketChange]

May not be perfect but if it is working for you and your comfortable with the risk and rewards why deviate? The holy grail only exists for the deepest of pockets with power and influence to change the rules of the game mid stream.

Quote from 1765hillwood:

half of 1000 is 500, half of 500 is 250 etc

 

[LeeD]

First, thanks to 1765hillwood and otcstockfund who suggested scaling out. So far I have felt my size didn't warrant the necessity to scale out but it is worth checking if this improves the performance.

Quote from deaddog:

Depends on your system.
Win rate, Risk/ reward ratio, etc.etc.

When you say not taking ptofits are you hitting your target and not closing the trade hoping for more or are you getting half way to the target and seeing the trade reverse?

Is the problem the strategy or the trader?

As people say, asking the right question is half of the solution. And this is the right question!

In the last month I have have been seeing a number of days with narrow daily range. Given a part of my strategy involves a certain minimum return per trade, I found I wouldn't be trading on some of these days at all. So, what I did is I started loooking at a longer time frame and based on this time frame extended the profit target (either to the next resistance level, or just by a few ticks) to where, it appears, it wasn't warranted.

First, it is an issue in part with the startegy. I should either accept that on some days I won't have a single trade... or change the strategy in a material way.

The reason I call this problem psychological is I notice when a trade is in the money I often refuse to accept that the price is forming a new support/resistance level and unwind... even if the price is a tick or 2 away from my target.

 

[LeeD]

Quote from 1765hillwood:

half of 1000 is 500, half of 500 is 250 etc

That's what I assumed when I read the original post...

Quote from PocketChange:

May not be perfect but if it is working for you and your comfortable with the risk and rewards why deviate? The holy grail only exists for the deepest of pockets with power and influence to change the rules of the game mid stream.

Because I find it uncomfortable when I don't have a single entry signal for a couple of days in a row. Maybe I should be more flexible.

 

[schizo]

Quote from LeeD:

I recently found out that the most common trading mistake I am making is not taking profits.

Maybe it's summer-time effect... but I see more often than not that the price hits my entry price, often a few times, before heading for my target.

Had I taken profit at the nearest resistance level and re-opened at the last trade's entry price (assuming the signal is still valid), I would have a few trades with a small profit... Instead I often wait long enough for the trade to revert from substantial profit, which is a couple of ticks away from my target, to the stop.

Is there something I can improve? Are you using any technique to take profits more consistently?

Here's a hint: It's the strength (of the trend), stupid!

Seriously, always consider where in the trend you're entering--be it intraday or swing trade. It's nearly always fatal to catch a falling knife or the runaway train. Even when the trend has reversed, it's treacherous to enter at the beginning of the trend. This is where you find yourself giving back all your gains. Think about it. You have both bulls and bears fighting for their dear life at this juncture. Hence, if you're entering as the trend is just beginning, learn to scale out early as others have suggested or simply scalp.

In my opinion, it is much better that you jump in on the pullback after the trend has been established because by then not only does the rest of the world also knows about it but you have the dimwit bears, who are frantically covering their short, adding fuel to the ensuing rally. Of course, reverse also holds true in a down market (only it's more vicious, which I'm sure you already know.)