Target Vs Maximize Profits

[rxs0005 10]

Dear Fellow Traders ,

 

I read somewhere a very powerful piece of wisdom that i would like to share with y'all which has certainly helped me improve my score card

 

Take risk when you are in the green or in profitability and take 0 risk when you are in the red stick to your sell stop and cut your losses

 

We all know that when we are in the red we somehow cannot believe it and start to "hope" that it will get back to break even and we take those risks and it will be that wonderful day when the most unimaginable drop happed for that stock we all have been there

 

my Q is

 

I trade based on a fixed target once i hit the price i run and then of course i see it takes off to greater heights and i seem to have left money on the table

 

what is better maximize the profits or hit the targets when it happens

 

do share your opinions and views

 

thanks

 

rxs0005

[M. Contrarian 10]

By all means respect your stops when a trade doesn't go the way you expected. When you set up a trade, setting up a fixed stop loss AND a trailing stop loss will help reduce your losses and protect profits. Once you hit your profit target (or if market conditions warrant), you can tighten your trailing stop and continue the "ride" with all, or part of your position.

Set your stops carefully, based on support/resistance levels and trading ranges, and then don't second-guess them -- let your stops take you out of the trade.

Edited April 21, 2010 by M. Contrarian
Wanted to add additional sentence on setting stops

[BlowFish 10]

I am not a big fan of fixed stops/targets, something that takes into account current market conditions makes much better sense to me.

 

I think by 'risk' you mean holding on past your target? Dosen't make sense to me you can only take what the market gives you and your and structure/price action/volatility is a better gauge of that. If you are at your target in no time at all with loads of momentum hold on. The market doesn't care whether your previous trade(s) ended up green.

 

Use account equity to determine position size not targets or stops.

[DugDug 10]

Q "what is better maximize the profits or hit the targets when it happens"

 

Regardless of what you do - be consistent, otherwise you will be like a dog chasing its tail going nowhere.

 

If you always take the profits at the target and those that keep running really really eat you up, then some suggestions are;

- actually measure, all the times that the runners compare to those that reverse and if you did not take profits what it cost you - do an empirical study.

- take profits on 2/3rds of the position and then let the rest run.

- let everything always run - in which case you will have plenty of losers but the winners can be big - you will have to run positions over many days, months even.

 

If you cannot sit on winning trades and ride through the feeling of giving back profits, then forget about running trades and stick to taking profits - its simpler and easier, the focus then remains just to maximise your risk reward on entry. Whereas when you run profits, entries become less important.

There was another thread similar to this, about scalling, in and out and taking profits on longer term trades - Answer - it depends on you, your comfort levels, what you are trying to achieve etc; ie; there is no right or wrong answer.

http://www.traderslaboratory.com/forums/f62/taking-part-profits-trend-trading-7466.html

Edited April 21, 2010 by DugDug