[TheNegotiator]

I think there is merit in both methods of exiting. Scaling out and/or trailers can be helpful in uncertain and volatile markets. Trending markets are possibly better suited to using fixed profit targets. What I have always noted in my own personal trading is that if I had taken something off the table in every trade I have ever placed which had shown a profitable phase, I would have considerably more money now. So I have tried to factor it in to my plan to do this even though often my full target does get hit. I know that for me it makes my plan more robust. Don't think as I am saying this that you should do this too. I personally trade in such a way that most of my trades do show some profitability at some point(MFE). But it depends what your strategy is, what your selected market is, what the market you trade is doing, your risk profile etc.

[steve46]

A couple of comments.

Most retail traders look at the chart and think "does this setup look good"? and then if they have some education and judgement they may have a rule for size (most of them simply trade one or two contracts so that is a moot point)...and then they may have a foggy idea of what the potential profit is going to be...and again (as you well know) most retail traders THINK they will hold a position but end up trading for ticks...and watching the rest of the move from the sidelines...

Much of this problem is lack of perspective...in that they don't think in business terms...for example time is money...there is an equivalency that you have to respect...within a certain time frame, you need to generate some profit, or you need to close out and move on to the next opportunity. If you have done some homework you know what your average hold time is for a winning trade, and conversely you know (or you should know) what your hold time is for a loser...Clearly you should strive to hold on as long as possible for winning trades and close down the losers as soon as you have identified them as unproductive.

If and when you obtain sufficient capital to move some size, you can take that opportunity to scale into your winners...Most professionals do this (in a specific manner) so as to insure that they have their biggest position size on when they are winning. Although I don't have time to provide the blow by blow details, I can say a couple of things that might help in this respect.

First, for each trade I take, I KNOW that there are going to be three (3) places where I can add size..I also know that adding size changes my risk profile, so I prefer to increase size as soon as I know that I have correctly identified market bias (as soon as I know I am on the right side). Often I am able to add to a winning trade within the first point or two...and it is often the case that I will double my position at that point....The opposite is also true...and that means logically that I will remove size if I don't see the market acting as I anticipate....and the result is that I will still take my full stop loss when I am wrong, but the stopout is taken on a position that is significantly reduced and thus the impact on my account is relatively small....clearly a lot of this is dependent on skill and judgement...

I hope I have given you something to think about

Good luck

[SIUYA]

great comments Steve.
This becomes particularly relevant when trading equities where the margins are not quite as favourable as futures or FX.
Often a question asked is - do I need to be here, and are there better opportunities to which to deploy my money. You want to be putting it to work with the winners, and to where the best opportunities present themselves.
Not as relevant to a single futures market participant trading smaller contract sizes, but still a good habit to get into.

[BlowFish]

You might want to consider RoR (Risk of Ruin) at the same time. This is a great little free site that explains it simply TradersCALM - Calculating risk of ruin

Knowing, and being comfortable with the likely hood of wiping maybe worth considering alongside maximising your gains. Chances are the latter will have some sort of impact on the former.

[TheNegotiator]

Nice exercise BlowFish. I wonder how many traders really grasp these kinds of concepts. Not many I would guess.

[CYP]

Originally Posted by carltonp »

However, I think I also need to follow MightyMouse's suggestions and learn to walk away and let my profits run until the target is hit. At the moment, instead of letting my trades reach its target of $150 (which is 1:5) I'm taking profits at 100 (which is 1:1).

Hi Carlton, please excuse my ignorance, but I'm trying to understand your risk:reward calculation. In order for you to win $150 by risking $100, I show a risk:reward ratio of 1:1.5 and not 1:5.

If it was was 1:5, wouldn't that mean you are risking $100 in order to win $500?

This is minor, but I want to make sure I have it correct regarding risk:reward statements.

Thanks,

CYP

[Trader1]

and what about leverage? shouldn't you also calculate that? and pip value?
since all pairs have different pip value,