Profit Taking Techniques

[cpatte7372]

Hello,

I wonder if some of you guys/girls could share some of your profit taking techniques with me. For the last few months I have been concentrating mostly on stops, and preserving capital. At the moment I have been taking profits when the Highest High has been reached. Any suggestions will be welcomed.

Cheers

Carlton

P.S.
This is all paper trading - I haven't actually put on a trade yet - still learning.

[cpatte7372]

Also,

Any suggestions on how you measure profit, for example do you rate your profit as a percentage of a channel, daily range? etc.....

All comments welcomed

Cheers


Carlton

[KingCAMBO]

profit taking techniques

Hi Carlton,

You know with regard to OEX specifically, I always have a Gann Square Of 9 profit objective, for instance right now I am targeting OEX 562 for first profit lock, and then OEX 558 for a secondary.

Likewise I use Square Of 9 levels for my stops too. Currently I have a stop on OEX puts at 568. I used to use you know $ amount or % amount stops on swing trades, but with OEX in particular those get hit too often because OEX is so volatile.

So, for my style I am using "technical stops and target exits". An exception to this rule would be my seeing a turn in a 60 minute chart - i.e. a new market structure high or market structure low forming.

Good trading!
KingCAMBO

https://www.kingcambo.com

[cpatte7372]

KingCAMBO,

Thanks for the feedback. However, I forgot to mention that I'm a newbie and most of what you mentioned what whooooossssh over my head. Can you explain what a Gann Square of 9 is? Also, is it system that you think someone extremely new to the markets should use?

Cheers

Carlton

P.S.

Cool website.

[KingCAMBO]

also on profits etc

Also Carlton,

I should add that in addition to Square Of 9, I also spend a couple of hours each morning working out my specific buy number and sell number for each vehicle I am considering trading. I then print these out and have them on a clipboard in front of me.

Here is an example of what I am speaking of:

http://kingcambo.com/mornprep/FR0213.pdf

In working up these daily calculations I am relying on the Taylor Trading Technique, which is a three day cycle method. I have some articles I can share with you on this method. It is probably more newbie freindly then Gann is.

best,
KC

[gspiker]

Hi,

Looks like you want to focus on taking profits and not a stop loss for the purposes of this thread.

It will really depend on your style of trading, and the size of your positions. One thing that has helped me is to quantify my signals. By this I mean understanding what is a strong signal and what is a good signal. I did this on the basis of gross group types (stock indexs, index related futures, commodities, low volume volatile stocks, high volume volatile stocks, high volume non-volatile stocks, etc).

Since many of my signals produce at least one price target, and sometimes multiple targets, this gives me an idea of how real these targets are, and how tight I should keep my stops. For multiple target trades (which might be off a single signal, or groups of signals - when the trade from one signal is still working its way out, and other signal might get triggered) I will scale out aggressively on weak signals, maybe selling everything at the first target level. On better signals I may scale out in three steps...hoping that the final target level is reached and that the small position I have left will reach maximum profits.

Scaling out did some wonderful things for my psychology as a trader. If I sold 1/3 too early...ohh well I still had 2/3 going on. If I only had 1/3 left and the market retraced I could play a wider stop knowing I had locked in some good profits and that I had lots of room to play with the profits with the 1/3 I have left.

Scaling in and out will not work for people who only carry small positions (scaling in on 3 contracts doesn't make much sense to me...scaling in on 9 could...scaling in and out with 24 certainly would). Nor will it work for extremely short term traders. The whole move would be over before you entered your second position.

You can use the same idea with anything...fib extensions, running bands with 3 different lengths, etc. The important thing is to understand when you are in a strong position and when you are in a weak one. And apply the rules appropriately. If I didn't know if I was in a strong or weak position, then I, being who I am, would always play it as a weak position...even if that means giving up potential profits.

G

[cpatte7372]

G,

Thanks for getting back to me. I'm reading and re-reading your comments. There are a couple of questions I need to ask based on your comments. First question, how do you go about determining a price target? I understand that you might check out high volume volatile stocks, for example, however I do you then set a price target on that information?

Cheers


Carlton

[FibbGann]

Lets see if I can put it simple.

Watch the speed of the tape.
S/R is big
Don't lose alot of money. Stops are your best friend.
Where are the futures going.
What are major market indicators saying.
How is the sector/group performing.
Is there Eco news coming out.
What ever interval you use to get in on, use it to get out!

It's that simple for me!

[cpatte7372]

Fibbgann,

Well put. I think I going to print out your comments in big bold letters and follow your statements before I take on any trade.

Thats excellent mate.

However, you fail to mention how you go about taking profits.

gspiker has come up with a few ideas that I'm trying to understand. I would also like to read your profit taking strategies.

Cheers

Carlton

KingCAMBO thanks for your comments.

[gspiker]

Carlton,

Many of my signals come from price, time and volume patterns. These often give price level or time interval targets for the end of a run. Some of these are very reliable and others not so much so...for the less reliable I have a fairly simple profit vs. risk methodology I use to determine if I enter or not.

Others are based on indicators, which are USUALLY a derivative of price, price/time, price/volume or in one case all three. In these cases since there are no set profit levels, I will look at fib levels, or use GANN to determine profit targets. Again, I try to understand how well an indicator works for that symbol, in that interval (and you have to determine how your trading instrument works also...esp. when thinking stops. After all a 5 point move on a stock, if you are traing an option based on that stop, could mean loosing 1/2 your investment). Often what really happens is I wait for many of them to align. As a example (this is an example only - I no longer use these indicators), lets say I have a stoch set up for tracking short term moves in the market, and a MACD set up for longer moves. I might wait for the MACD to signal, and then if the Stoch is near peak I might wait for the stoch to pull back and signal long again. But I would understand that when this pattern of signals happens - it typically has either good or very good results. If I didn't understand that - wouldn't play it.

Lets say it had good results in my backtesting. Then I might keep a looser stop and only take partial profits at my first target level (assuming everything still looked a good). If it had only reasonable results (and by this I mean about 50% effective) I would keep tigher stops and take all my profits sooner.

Remember, with good maney management, even a 50% system will allow you to make money. The key is to know your risk reward and be willing to take your profits at a reasonable time.

You will find that some signals can be very very accurate...but if you only wait for those then you will spend most of your time out of the market. Your money will not be working for you. So you have to detrmine what trade sucess rate will work for you, and what your profit to risk ratios have to be at that sucess rate. Some system people play are less than 30% accurate, but they take their losses quickly and when they have winners they run really fast. Myself, I know I couldn't work with a system like that. If I loose (even small losses) 7 times out of 10 trades - it would depress the heck out of me. Even if I understood this was the way the system works...doubt and fear would win. And remember that is just an average...you could easily run into more than 7 straight looses in a row under such a system. So I, like many people would guess such a system was no longer working after loosing 12 trades in a row...just as it was about to reenter its winning ways.

Anyway...hope this helps.

Garth

[KingCAMBO]

Carlton one last thing...

Maybe one thing you might want to think about, especially now while you are still in paper trading mode - is to develop a personal trading plan, and then spend a month or two or however long it takes working through your plan to see if it is realistic and can be achieved. Here is my trading plan:

http://kingcambo.com/tradingplan/tradingplan2003.pdf

If you peruse that you will see how profit taking strategies start with small achievable goals, and then step up as the plan progresses.

You might also want to add a couple of books to your study materials. Two that come to mind are:

The Trading Game by Ryan Jones and Trade Your Way To Financial Freedom by Van K. Tharp

Best of luck,
KC

[cpatte7372]

Originally posted by FibbGann
Lets see if I can put it simple.

Watch the speed of the tape.
S/R is big
Don't lose alot of money. Stops are your best friend.
Where are the futures going.
What are major market indicators saying.
How is the sector/group performing.
Is there Eco news coming out.

Fibbgann,

Would you go through the above scenario the night before putting on a trade, or say an hour before? If day trading when would you carry out the assessment of the markets? etc.....

Thanks

Carlton

[FibbGann]

Cpatte,

If you look in depth of what I said, You will see where I take my profit.

In my opinion, you can flat out use price and volume for trades. I have tried many other indictors and trading styles AKA (Gann, AGET, Elliot, and many other theories) I came to the conclusion that they are just too time consuming. And after studying all of them thuroughly, they all have to many exceptions or flaws. Way to many ifs and or buts!!! If you read the recommendation I gave you, alot of these questions you have been asking would be answered with clarity.

The only indicator I frequently use is the Fibonacci 50% rule. (intraday)

Good luck,

Fibbgann

[cpatte7372]

Thanks guys,

This forum is truly great.

KingCAMBO I'm going through your plan.

Cheers all.

[KingCAMBO]

Hey Carlton,

Cool! As you go through it, adjust it and recalibrate it per your own style and temperment - and then make it YOUR plan.

It is good that your in paper trading mode at the moment, because this will allow you to learn, and hopefully avoid the cost of the "Screw U" tuition that many of us have paid over the past 10 years, the hard way.

Hope it is useful and or helpful for you.

best,
KingCAMBO