So now i would like to pen down my thoughts on taking profits (something that you will realize is very important once you are able to put on a string of winning trades).
Let's take a big winning trade that I just took as an example:
|This is a typical setup in which I trade. I had initially plan to take profit at predetermined levels (see below).|
|This was my predetermined profit levels.|
"A battle plan rarely survives first contact with the enemy"
Just like any plan, a trading plan must be flexible and altered as the trade carries on.
Question: Wouldn't you miss out if the resistance is broken?
Answer: That is very true. But based on market condition, market looks indecisive. I never ever want to be in a situation where market is indecisive.
In the end, it boils down to two different type of mindsets:
- I want to ride out a trend and I don't mind losing out on small gains. (In short, I prefer breaking even than missing out on a trade - regret)
- I admit I don't know where the market is going so I take profit whenever the market tells me to (In short, I rather take money on a trade and not be too greedy and regret taking too little profits)
In the many trades I have done, here is my discovery:
When you are unsure about taking profit or not, it is highly likely you should take profit.
Here is the rationale:
Often, your view is not objective when you are in a trade. Hence, you are highly likely to dismiss information that is contrary to what you expect. This results in a confused state, leaving you unsure what to do.
Advice for the day >> Whichever style you choose, make sure you use it consistently so that you will be able to tell if it is working or not.