There is no fantastic or precise answer to the questions above. We've seen profitable trades gone sour because of the trader's indecision to close the trade while it was still in profit. We've also seen would have been better profits reduced due to high expectations of an increase in the profit, which later reversed negatively. There is a side that says "take the profits as soon as possible", and another side which says "hold on until your profit target has been reached".
When Should I Take My Profit?
The best answer lies on the individual's personal goals, with diverse recommendations. This means if you are desirous of achieving 20% monthly returns in a certain period, then you should divide that 20% goal in relation to your account capital on every day's trading session, and stick to it.
Illustration: The capital on my account is $1,000.00 and i wish to make 20% returns from it monthly.This implies that at the end of the month my account should increase to $1,000 x 20% = $1,200.00. Therefore i need to divide the $200 (i.e. 20%) expected monthly returns over 30 days or 20 days exclusive of weekends or any other duration depending on my targets. That means i need to aim for $200/20days = $10.00 per trading session or $200/10 sessions = $20 per trading session.
Most Forex systems (EAs, Strategies, Signal Services, e.t.c) use the default 30 pips for SL and 20 or 100 pips for TP. However most traders out of fear, and anxiety take out their profits too early, while the greedy ones take it out too late hoping it would increase further. It is better to have successive runs but not reaching your profit targets than to have consistent negative runs due to expectations of reaching your targets.
Q/A - Two traders account with similar opening balance. Which of them stands a better chance of overall positive growth?
- $850.00, $9850.00, $430.00, -$3850.00, -$6850.00, $210.0, -$6850.00, -$1250.00, -$5850.00, $450.00
- $150.00, $20.00, $70.00, $50.00, -$200.00, $280.0, -$80.00, -$30.00, -$50.00, $90.00, $110.00
Some Key Facts About Price
1. Price is never static unless the market is closed or paused due to awaiting news release.
2. They can react sharply in opposite directions in nano seconds.
3. A trend consist of undulating price movements either in an upward or downward direction. Therefore you could see your profits or pips fluctuating from positive to negative positions or increasing and reducing but gradually growing.
The key advise here is to control your emotions, maintain trading discipline, and practice very well.
How Much Profit Should I Take?
Take all of them! Apparently you cannot take fractions of
your profit unless you open multiple orders, and close them individually when they reach their profit targets (take note of FIFO rules). There are some utilities (trade managers) that allow taking of profits in fractions of the lot.
It is a good idea to take out some profits while allowing the trade to continue to break even. At least you are sure of securing some profits while expecting more of it when it reaches break even. However if price retraces you have nothing to lose because the first fractional TP becomes the SL. If price continues to move to your favour then the same process is repeated until it gets to break even. The Pivot and Fibonacci indicators are very good at setting points for fractional take profits.
Where Is The Best Place To Set Profit Targets?
This is dependent on your trading strategy. However you can use price range levels to determine how far a rally can go in a trading session, and then set your profit targets withing those levels. For instance the EURUSD can go as far as 100 pips at the beginning of the US Session. I would aim for 50 to 60 pips in my breakout system.
News traders are advised to set profit targets at least 30pips from the order placement due to extreme high volatility, and high rate of quick reversals after the initial news release. Better still wait for some few minutes after the news release before placing an order.
Try: CNT EA
Tips/Caution:
1. Use past resistance and support areas to set profit targets
2. Use pivot point indicators and Fibonacci to get accurate points for profit targets.
3. Use the right profit targets for scalping or inter day trading.
4. Do not set profit target at reversal areas.
How Can Trade Management Tools Help Me?
There are lots of Trade Management Tools, that perform more than managing profits to stop loss management, and account risk management. Most of them are automated, and hence takes off the stress of manually monitoring your trades even while your trading platform is offline. Trade Management Tools can perform virtually all the trade management action a trader would do manually. They are precise, no emotions, accurate, fast, and can handle multiple orders/accounts simultaneously.
- Managed Take Profit: Allows fractional take profits, dynamic stop loss placement, e.t.c. (Simple & easy to use)
- Multiple Take Profit Position Management App
- Sentry EA:Monitors account equity, cumulative profits or loss, multiple loss/profit targets (Recommended)
- Forex Tester: A professional training software that helps you to develop trading strategies, and affords you the opportunity to test profit targeting and trade management in your trading strategies. This tool would help you develop better profit targeting in your trading strategies. (see promotional offer)
In summary the right profit target is crucial to your account growth. The tips stated here might not be sufficient enough, so we welcome everyone to leave their comments, and tips that would help traders improve their success in Forex.
Happy Trading.
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