How you define significant positive excursion is up to you whether that be 3 pts or 10 pts but you have to realize the ATR of the market you are trading which will determine what is to be reasonably expected. Average 3-5 pts a day trading the FTSE and you'll never work for someone else again in your life. It is a personality trait that causes people to value what they want over what they have. Protecting what you have is Job #1 and keeping what you earn is Job #1a. [/B][/QUOTE] Looking back at my trading history and experience, your what you sat does make a lot of sense and gives me food for thought. Thanks
What you say does make a lot of sense I must admit your 2 cents may bring many dollars in my direction. Thanks
<<As the trade in your example evolved the 5 pts of unrealized gain then became another part of the equation that was certain. So now you have 3 known variables(your stop, your entry, and 5 pts of gain) and 1 uncertain variable(10 pt target which is now 5 pts away). So if you are even confident that your target will be reached you should still lock in at least 3 pts of profit therefore you are now risking 2 pts to get the remaining 5 pts that are left until you reach "your" target. You have traded long enough to go back and review your trades and you will see that you would be better off locking in profits especially after the market has made a significant positive excursion in your favor. How you define significant positive excursion is up to you whether that be 3 pts or 10 pts but you have to realize the ATR of the market you are trading which will determine what is to be reasonably expected.>> Good point but not completely true, depends on your particular system and trade history. Generally speaking, if you have a well-tested and 'stable' system with well calibrated win/loss amounts and smooth pnl curves against profit targets, then trailing stop will 'reduce' performance over the long run. 'Risking 2 points for gaining 5 points' kind of reasoning sometimes serves as an illusionary logic which can lead to sub-optimal performance. However, if your system is not very well defined and is highly adaptive to evolving market conditions and pnl curve against profit target is not smooth, then a trailing stop 'might very well improve' performance over the long-run. Keeping in mind the above theoretical discussion, best way to empirically decide is to go through your trade history and see how putting in trailing stops would have affected your pnl performance and drawdowns. Also, look at if reducing your target profit improves performance significantly? Maybe you are shooting for too much. Assuming you are daytrading, generally speaking your profit targets should be a function of ATR or some other form of volatility, if they are not, you need to have very valid reasons as to why not?