Hello, I just wanted get some opinions on profit taking in terms of stock day trading. Usually when the trade is going my way, I put a stop right above the entry and let it run. When it runs it works great, but more often I see the trade come right back and stop me out. The issue is that if i take my short term profit targets I often miss out on the great runs, but when those runs don't happen (they don't happen often) I am left with nothing. After reviewing it seems that the sum of profits that I lose from not cashing out during the short term bounces is greater then the profit that I make when I do catch a run. Do you agree with this? Should I leave the big runs for investors?
Personal experience says, "a bird in the hand is worth two in the bush". That phrase is all the more true in trading. Do yourself a favor and set a legitimate target and get out at that target. Then after you are out watch for a re-entry point if the setup presents itself again. Generally, securities don't trend without pullbacks. This is true in all time-frames. If you have to, use brackets and don't violate your rules. Always take profits when originally intended and if possible use those profits to scale up the next trade.
The best solution is scaling out. Split your position in two or more targets. First target your short term profit... Second target your long term goal.
Big runs really don't happen often. I don't usually count on them and if they do happen and I do miss them I don't really stress too much. Missing the big runs is the cost of playing it safe.
You can have A or you can have B ... or as mentioned previously, scale out use trailing stops as well