4&1 All Time Profit:
$37,496
- #101
- Jul 12, 2019 4:29am Jul 12, 2019 4:29am
- Joined Feb 2016 | Status: Full Time Trader. | 5,429 Posts
- #103
- Jul 12, 2019 9:20am Jul 12, 2019 9:20am
- Joined Feb 2016 | Status: Full Time Trader. | 5,429 Posts
4&1 All Time Profit:
$37,496
- #105
- Jul 12, 2019 3:46pm Jul 12, 2019 3:46pm
- Joined Feb 2016 | Status: Full Time Trader. | 5,429 Posts
4&1 All Time Profit:
$37,496
- #106
- Jul 12, 2019 5:10pm Jul 12, 2019 5:10pm
- Joined May 2019 | Status: iTrade | 1,838 Posts
The premise is still the entire RR ratio must be favourable and prioritised but taking partial profits and adjusting your SL is merely a means to reducing your overall risk exposure
Ef5, different approaches work for different traders. I've read a lot of your posts as well and you've shown a pretty high level of understanding. At certain times in your posts I have to give my head a rest. That's a compliment. You two have quite the discussion brewing and I'll be reading. I can tell you that MzansiObi is dropping some knowledge. A lot can be learned from both of these dudes.
Have a good weekend fellas. Let's see what next week brings us.
We must learn who is gold, and who is gold plated
EventsTrader Live All Time Return:
54.4%
{quote} Hey bud, I hear your rational. Look. The premise is still the entire RR ratio must be favourable and prioritised but taking partial profits and adjusting your SL is merely a means to reducing your overall risk exposure....consider the following scenario based on what happened today, We literally sold off of the 1hout sell area Wich was the 1410/11 handle.... And whebever price he takes near 1405/6 since we are already in profit close for some profits and reduce your overall exposure. If price comes back to your entry price you're knocked...
I see this as two slightly different topics.
- Closing out part of your position early.
- Moving an SL to BE.
1. Taking an early partial profit.
I think taking an early profit might hurt you. For example, say you want to put on this trade:
TP: 1,450
Entry: 1,400
SL: 1,390
Here you have a R:R of .2 where you stand to gain 5x as much as you risk. As long as you get that trade right 20% of the time you're breaking even (less commissions.)
If you close half out early though, then you're really taking two trades. One that goes all the way and one that goes part of the way. So maybe you have this:
Trade 1
TP: 1,450
Entry: 1,400
SL: 1,390
Trade 2
TP: 1,450 1,420
Entry: 1,400
SL: 1,390
In one trade you're risking $1 to make $5 and in the other you're risking $1 to make $2. Your R:R goes from .2 to .35 so you'd need to be correct a little over 1/3rd of the time to break even.
Based on that reasoning, in my view taking partial profits seems suboptimal. However, it's not as simple as I'm making it out to be. My example assumes market conditions are the same at 1,420 as they were at 1,400 which isn't really true. As the price moves your odds of winning change. There are any number of factors with a system (ie momentum) that make the situation different at different price levels. For that reason I wouldn't be surprised if you replied back showing a Monte Carlo simulation where a partial profit actually does produce optimal results. While I think I'm correct in a general sense about taking partial profits, there are going to be cases where it would be optimal.
Going down this path takes us into a discussion on probability which is not my strong suit to be perfectly honest.
2. Moving an SL to BE.
When I trade, my initial SL represents a level that if the price gets to it I know I'm wrong so I get out. My entry price is relatively arbitrary so if my trade becomes successful I wouldn't adjust the SL to BE since my BE isn't a significant price level... As EventsTrader said, different approaches work for different traders so if your BE is meaningful then it may indeed make sense to move your SL there. I just wouldn't move a SL to BE simply for the sake of eliminating risk. While you're not risking your balance, you're still risking your equity and that has more relevance in my opinion.
Truth be told I actually don't even use a TP. I have some idea of where the price should go in order to know my R:R, but I let a trailing stop take me out so the trade always has asymmetric reward. Regardless of the likelihood, if gold suddenly wants to jump to 1,500 then I might as well benefit.
Self-sufficiency is the greatest of all wealth. - Epicurus
- #108
- Jul 13, 2019 2:53pm Jul 13, 2019 2:53pm
- Joined Feb 2016 | Status: Full Time Trader. | 5,429 Posts
{quote} Thanks MzansiObi, you have an interesting perspective on this! Before I get started, let me just preface this by saying there are some ways we both could be correct. I'm not discounting your approach at all.
I wanna keep this as simplistic as possible.
Consider this scenario briefly.
I enter my initial trade and risk 10 USD to make 50 USD, but before I get to 50 USD I close for partial profits and bank 15 USD. And adjust my SL to BE.
Consider what happened on Friday. Sold 1410 ish handle 3 times and got stopped out at break even 3 times.
But on all three occassions I banked my 15USD so those three trades that, in essence went against me yielded me 45USD, 5 dollars shy of what I had wanted on my initial trade.
Now had I not adjusted the trade by taking partial profits and moving SL to BE, I would've been down 10USD.
After selling the level three times and making incremental capital and equity gains, before getting stopped out I decided I would no longer sell the level till support was broken as there was hidden RSI divergence of which I mentioned. I stopped selling the level and still walked away having gained somewhat what I had hoped to gain in one specific trade.
You could counter that and question, what would've happened had the initial trade gone in my direction after taking partial profits, well I'd bank the15USD and a little more, *RISK FREE* while I have freed up some leverage to look for other setups......the risk reward on this is still favourable as it's still more than 1:1......
While the balance may increase by taking partial profits, I will still be protecting my equity because my equity drop will be capped but still be a gain albeit incremental should I get stopped out at break even, and even then I will walk away from that trade having gained and the most important thing is Equity preservation and in essence risk mitigation.....
In summation, if I can reduce my risk, reduce my stress, and make money then I'm good. Realistically speaking, we rarely make/reach the full TP or actual price to the pip intraday wise...just as much as you will never always get a trade that immediately moves in our favour/direction.......
On top of that, just as an add on factor which is more specific to myself, I get rebates on the volume of trading I do....
Hope this helps clarify
4&1 All Time Profit:
$37,496
- #109
- Jul 13, 2019 2:57pm Jul 13, 2019 2:57pm
- Joined Feb 2016 | Status: Full Time Trader. | 5,429 Posts
4&1 All Time Profit:
$37,496
{quote} Hey bud, you're absolutely correct when you say in essence I'm opening two trades. I wanna keep this as simplistic as possible. Consider this scenario briefly. I enter my initial trade and risk 10 USD to make 50 USD, but before I get to 50 USD I close for partial profits and bank 15 USD. And adjust my SL to BE. Consider what happened on Friday. Sold 1410 ish handle 3 times and got stopped out at break even 3 times. But on all three occassions I banked my 15USD so those three trades that, in essence went against me yielded me 45USD, 5 dollars...
If I didn't make myself clear earlier, I completely agree with being conservative and prioritizing equity preservation above all else. That's something I learned the hard way!
{quote} I enjoy the constructive dialogue.....only makes us better traders to be honest
This dialogue has given me a better appreciation of the many nuances of money management.
Self-sufficiency is the greatest of all wealth. - Epicurus
- #111
- Jul 15, 2019 2:42pm Jul 15, 2019 2:42pm
- Joined Feb 2016 | Status: Full Time Trader. | 5,429 Posts
4&1 All Time Profit:
$37,496
- #113
- Jul 17, 2019 1:09am Jul 17, 2019 1:09am
- Joined Feb 2016 | Status: Full Time Trader. | 5,429 Posts
4&1 All Time Profit:
$37,496
- #115
- Jul 18, 2019 12:22pm Jul 18, 2019 12:22pm
- Joined Feb 2016 | Status: Full Time Trader. | 5,429 Posts
4&1 All Time Profit:
$37,496
- #117
- Jul 20, 2019 7:33am Jul 20, 2019 7:33am
- Joined Feb 2016 | Status: Full Time Trader. | 5,429 Posts
4&1 All Time Profit:
$37,496
- #119
- Jul 22, 2019 2:14am Jul 22, 2019 2:14am
- Joined Feb 2016 | Status: Full Time Trader. | 5,429 Posts
4&1 All Time Profit:
$37,496