Shooud you let the profits run OR take smaller profits and increase position size?

[Handle123]

Hello,


say for example that you trade intra-day break-outs of range. How do you determine, when to take profits? How do you choose your target? For example some days I shoot for 100 points and take profits, only to find out price moved another 200 point in my direction. Then the next time I decide to leave trade open longer only to find out that profits evaporate and I exit with break-even.

Yesterday was a good example on SP500. It broke down nicely, I took profits way to early, but when I looked at the price at the end of the day it was much higher. So I was glad I took profits prematurely.

So would it be better to increase position size for 100 % and shoot for 100 points, or keep position size the same and wait longer. How do you decide? If you wait longer then you have fewer but bigger winners and vice versa. But there must be some "optimal" way to calculate. Do you consider average daily range? Last few days? Because volatility can change dramatically. You have days that barely move and then huge up or down days where it pays handsomely to wait..

thanks for help

Tomaz

So much to answer cause it is not easy to answer. ALL can be answered by much back testing and not here. No one knows your Trading Plan which is incomplete if you are asking this forum. Much has to be considered, timeframe, number of trades per day on average (5 years). http://www.tradingheroes.com/mfe-and-mae-deconstructed-and-how-they-can-help-your-trading/
Maximum Favorable Excursion (MFE)– is a maximal unrealized profit during the period.
Maximum Adverse Excursion (MAE)– is a maximal unrealized loss during the period.

Best is try to nail down 90% of best accumulation of profits. Say you trade ES and you see best profits are 2.00 points and perhaps it hits 50% of the time, then on each side it tapers down.

There is always trade offs as well, when you go for higher profits losing percentages will go up and when you go for smaller profits, losing percentage should go down. But seriously, only the stats should direct you what is best.

 

[formica]

If you have a small account, put on bigger positions and take smaller profits i.e targets. Your aim is to build the account as fast as possible. Hopefully you will have a high win rate. As you become bigger, you decrease the size of your positions (proportionally speaking), use less leverage and start letting winners run. Although your win rate will fall and your drawdowns increase, you;ll make more money at the end of the year than you would by having profit targets.

I may expound on this concept if you wish.

What if anything goes wrong? What if at a certain account building point, you get a bad trade and because of using high volume for bigger profit you get ripped off!! Don't you feel bad at that certain point and you have to start over again !!!

 

[jamesvo]

I think increase position size could increase the risks as well. Getting steady profit is a safe way to keep your account alive and a good performance.

 

[Rashid_G.]

So much to answer cause it is not easy to answer. ALL can be answered by much back testing and not here. No one knows your Trading Plan which is incomplete if you are asking this forum. Much has to be considered, timeframe, number of trades per day on average (5 years). http://www.tradingheroes.com/mfe-and-mae-deconstructed-and-how-they-can-help-your-trading/
Maximum Favorable Excursion (MFE)– is a maximal unrealized profit during the period.
Maximum Adverse Excursion (MAE)– is a maximal unrealized loss during the period.

Best is try to nail down 90% of best accumulation of profits. Say you trade ES and you see best profits are 2.00 points and perhaps it hits 50% of the time, then on each side it tapers down.

There is always trade offs as well, when you go for higher profits losing percentages will go up and when you go for smaller profits, losing percentage should go down. But seriously, only the stats should direct you what is best.

Best answer.... Basically this is the "work" in trading. What about on a weekly/monthly basis factor in ATR and target a healthy percentage of that.... I would add to keep a small percentage in case of the aberration day where it flies multiples of ATR...

Bottom line the only reason this question is being asked in the first place is the human inability to deal with the randomness of markets, which causes pain. The hybrid exit method I think covers you psychologically in both ways the markets "hurt" us.

 

[Handle123]

I think increase position size could increase the risks as well. Getting steady profit is a safe way to keep your account alive and a good performance.

So you going with trading a one lot rest of your life? Any time you increase size you going to increase risk, but not risk per trade, so that comes down to losing percentages.

What if anything goes wrong? What if at a certain account building point, you get a bad trade and because of using high volume for bigger profit you get ripped off!! Don't you feel bad at that certain point and you have to start over again !!!

Something will always go wrong, nature of the business, you must have that in your Trading Plan and have answer before problem arises. But unless you are happy trading a one lot, wealth accumulation going to be slow going. Do you think McDonald's be as big as it is if they had the one store? Do you think Starbucks have had the big run up with one city of selling coffee? You take risks and providing your back testing shows what you want to do over longer duration trading, history does repeat itself, if you don't think so, you not gone back in time long enough.

What happens when market you day trading has 20-30 days in a row where ATR is 50% of what was normal for last two years and you only go for large profits? Could you lose half your account? Whereas the trader who goes for smaller profits will make money almost each day. I found in my back testing that going for 2.00 points in ES is much easier and less time consuming than 10.00 points and having to sit there all day. If you can't be making 2-6 points in first hour of day session consistently, spending all day unless you getting education, trading only gets much harder.

 

[Tomaz26]

So much to answer cause it is not easy to answer. ALL can be answered by much back testing and not here. No one knows your Trading Plan which is incomplete if you are asking this forum. Much has to be considered, timeframe, number of trades per day on average (5 years). http://www.tradingheroes.com/mfe-and-mae-deconstructed-and-how-they-can-help-your-trading/
Maximum Favorable Excursion (MFE)– is a maximal unrealized profit during the period.
Maximum Adverse Excursion (MAE)– is a maximal unrealized loss during the period.

Best is try to nail down 90% of best accumulation of profits. Say you trade ES and you see best profits are 2.00 points and perhaps it hits 50% of the time, then on each side it tapers down.

There is always trade offs as well, when you go for higher profits losing percentages will go up and when you go for smaller profits, losing percentage should go down. But seriously, only the stats should direct you what is best.

Just the thing I was looking for, thanks. I will also see through trial and error and last 100 trades if I am leaving too much on the table or if I am actually waiting too long to close the trade. Right now I think I am something in between..

Just the other day I traded the whole day and ended with 130 points profits from 19 trades. 15 winners, 4 small loosers, but at the end of the day the result was the same as if I had just bought the index and closed the trade at the end of the day.. Days like that I ask myself if it is worth watching the price all day, making trades and being nervous. Sometimes it would really make more sense to swing trade and have position open for a few days. Just as you can find low risk entry during the day, you can find low risk entry for swing trading, tight stop for 20-50 points and trying to catch 500 points move.. I am talking German index DAX here..

thanks to all for some very good insides!

 

[Redneck]

Shooud you let the profits run OR take smaller profits and increase position size?



In my simple minded thinking;


Take smaller profits.., why

Mkt trending - making money

Mkt rangy - still making money


Yeah - one misses the extend move by not taking the "let it run" route

But

Can always re-enter

and

Significantly reduces the "price returning for a stop out" when it doesn't run


=======================

Impossible to do both..., so pick your poison - then drink it with delight


jmo (and way of trading)

RN

 

[loyek590]

Shooud you let the profits run OR take smaller profits and increase position size?



In my simple minded thinking;


Take smaller profits.., why

Mkt trending - making money

Mkt rangy - still making money


Yeah - one misses the extend move by not taking the "let it run" route

But

Can always re-enter

and

Significantly reduces the "price returning for a stop out" when it doesn't run


=======================

Impossible to do both..., so pick your poison - then drink it with delight


jmo (and way of trading)

RN

yes my friend, but that assumes you are operating more efficiently than the guy below you who is taking even smaller profits

 

[Redneck]

yes my friend, but that assumes you are operating more efficiently than the guy below you who is taking even smaller profits

I hate guessing

If you're referring to weak handed (headed) traders - I don't care

If you're referring to HTF - I don't care


Both are simply part of the fabric that makes up a mkt

Assumptions unnecessary - simply trade accordingly




RN

 

[loyek590]

I hate guessing

If you're referring to weak handed (headed) traders - I don't care

If you're referring to HTF - I don't care


Both are simply part of the fabric that makes up a mkt

Assumptions unnecessary - simply trade accordingly




RN

just two sides I suppose, one side is trying to make meaningful money on smaller and smaller moves, and the other side is looking for even larger moves

I know I can't compete on costs, so that kind of rules out smaller and smaller moves for me

so I need a big move to make any meaningful amount of money, and in an efficient market those big moves occur less and less frequently

so in an efficient market I look for smaller and smaller moves until the costs eat me alive

and so the circle goes