Taking Profits & Letting it ride...

Discussion in 'Strategy Development' started by Ripley, Jun 14, 2005.

  1. Where do you draw the line? Because today was a range day, and if I took +$50 profit targets, I would've had +$300 or something.

    But, I ended up letting profits ride and ended up with a -$ 185 loss. That is sad because I had some good trades today, only that there were no follow through. Letting profits ride works well in a trending day and it doesn't work well on a range bound day. And taking profits doesn't work well on a trending day because you would end up leaving too much on the table.

    So, where do I draw the line. Should I have a daily target and take profits till I get there or suffer through days like today.
     
  2. Dude everyone is going thru the same thing you are. Look back at last June same ole song and dance. It wont always be like this, (I hope). Inflows to equities have slowed to a trickle. Things will pick up this fall, until then be quick.
     
  3. Identify range days early on and realize that there will most likely be little follow through and look to book profits sooner.
    On trending days, indentify them early and hold. Its really that simple. Now implementing, thats the tough part.

     
  4. First off I am not a trader or a big market participate..I do buy Calls if Bullish and Puts if Bearish and I'm also a gambler...with that said, I feel you should have a target where you take profits....I do...for example...when it comes to buying options I set 35% Profit for my goal.....To give you an example, the other day, June 9th, I purchased 2 Sept. 105 Calls on TOL for $4.50 (TOLIA) when the stock was approx $96.69....So those 2 calls cost me $900.00 not including commission...so I take 35% of $900 and get $315.00 so add that to my cost of $900.00 and that comes to $1215.00......

    So I will sell when the calls that I paid $4.50 the other day when they are worth $6.10 or maybe will take it out at $6.00 (if it does ever hit this...they closed today at $5.50 I believe)

    So I bang them out taking my 35% profit even though I feel TOL is going to go even higher by September..but I will watch after taking my profits and just repeat what I just did....I also have a number of calls on another housing stock and will bang that out once my profit reaches 35%...(again, if it does)

    In horse racing, when betting daily, I also look for 35% profits on my daily bet capital........If I plan on betting $2,000. say for 6 races the entire day and if after only 3 races, I hit my profit of 35% which would be $700.00 on $2K, then I'm done for the day..don't even bother with the other races that I have already made selections on.....The one exception to my 35% rule is stake races or the Triple Crown Races that just concluded...I bet much more money on those races and look to make an unlimited amount of profit...

    Being that I am not a trader, I hope I am getting across what I am trying to say and that is, yes, I think everyone who trades (wagers) should have a goal pre-set and once that profit pre-set goal is hit, then bang it out before you lose it.....There will always be many more stocks or races to bet on in my case..

    Good Luck
     
  5. AusTrader

    AusTrader

    Thats the luck of the draw. Some days a large range days, some aren't. You can't have it both ways and I don't think it matters in the longer term.

    However, if you run a simple test on any volatile stock or index. Simply buy the open and place a tight stop, say 20% - 30% of the average range over the last 200 days. Next simply exit on close.

    From there add in varying increments of profit targets or better still optimise the lot. Now take a look at the parameter sets and you should see that ANY profit target over the longer term detracts from overall profitability. Its a bummer that these days happen, but that should be viewed as a small annoyance rather than missed opportunity. My experience is that a profit target decays profitability.

    Two things to consider:

    (1) Most successful traders are trend followers. Eckhardt etc never use profit targets because it will skew your win/loss against you.

    (2) you'll never make a big profit by taking a small profit. I can guarantee that.
     
  6. Are you saying that go on the side of trend and take
    small profit, and don't look for much bigger winner like
    3-4 times your Avg losers?

    Or is it that you are saying like Eckhardt etc never use profit targets means they are looking to let it run, and not booking
    quick small profits?

    Now which one is it? Thanks
     
  7. there are two things here.

    as traders we need to let profits run...but
    we also need to secure the trade as it moves in our favor for precisely the reason/example the original poster gave...

    in your trading you HAVE to have some criteria that tells you, "ok the trade WAS proven correct, but NOW the trade is NOT likely to continue in my favor, so i will exit with my 'small' profit due to my decreased probabilities"

    in addition to this you need to have a either, profit taking or profit securing money management aspect to your trading.

    i can't tell you what to do specifically, that's your job.

    steve also had good suggestions, but that won't help you actually TAKE the profit early (if it's a non-follow through range day)
     
  8. Take partial profits. ( not being a wise ass, it's the only way I know unless it is a really obvious trend or range day).

    Same for all of us, if you let your profits run they evaporate, if you take profits the market breaks and keeps going.
     
  9. Yes, quite true.:D

    Since most of us judge the market by the way it 'looks', maybe there is something about its looks that wrong-foots us so much.

    That is where a well-developed system comes in handy. It takes pressure off of you to have to 'look' at the market after each and every bar to decide whether to take your profits or let them run.

    Happy Trading :)
     
  10. Just an update for my post yesterday..I did close out my 2 TOL Sept 105 Calls today as it hit my 35% profit target...I closed out at $6.10 for them about an hour before the close and while TOL was still below 100 which it did break and even closed above today and yet another 52 week high....

    I will be looking for any pullbacks now to possible re-enter..
     
    #10     Jun 15, 2005