ModernAssets replies to: Advice on taking profits on Daily/Weekly Timeframes

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Hello, I have been trading demo for over 7 months now purely on price action (only on Daliy and Weekly timeframes) and I have averaged 3.5% a month on my account risking no more than 2% a trade so far. I would say my win rate is between 60-65%. The problem that I seem to have is that I very rarely take profits over 1:1 risk reward. I take my profits at next the next again support or ressistance zones which I tend to fine are around 80-100 pips and as I trade from the higher time frames I have to risk between 80-100 pips. I would say out of 10 trades…

I’m not sure if you noticed but the past several months…depending on which pair you are looking at…have been ranging between 100-250 pips. This is typical of the “summer doldrums” and does require a bit of patience for taking profit. or trailing your stops. As well…it has always been my practice to “engage at the edges” of any range. That means entries AND exits. so while the market remains range bound you can continue to make profitable trades by “engaging at the edges” of the range.

It also sounds to me like you don’t have sufficient data to make a determination on where to place your take profit orders. This data can be gathered while you are waiting for these frustrating ranges to resolve. Here are some questions that you will need to answer to gather your data:

  1. Based on your entry (the method and style you use to enter)…how far does the average positive move go before a significant pull back (greater than 50% of profit)…How far in pips.
  2. How long does that usually take (on average)…10 candles, 15, 20? Remember each candle is time so this tells you how much time you will likely hold your average trade
  3. Based on where you place your stop, does that 60-65% of trades that finish positive render only 1:1? Is there a point that gives greater? How often do you see, 2:1? or 3:1? or more…what percent of of those positive moves?
  4. What is your average drawdown on an entry? In other words: does your entry go negative for a time then go positive? Or do you see quick profits that then errode after a time then come back? This can help you determine better stop placement which then translates to risk-to-reward.
  5. Knowing at least these data can help you determine where to place your stop and your limit on your “typical” entry.

You will find that collecting this kind of data on your trades helps make your trading more effecient and will also give you a good idea how long to wait before seeing profit (on a typical trade) and where/when to bail out if things just aren’t going you way. I’ve found in my own data that 2.8 to 3 (xR) is the magic number. My typical stops range between 80-100 pips. And the average winner lasts around 3 weeks. Some longer, some shorter.

It will take some time to collect this kind of data and if you find it helpful…you will never cease collecting and analysing. This is probably the most important step you will take in your trading and will very quickly put you into the 5% of traders that consistently take profits. If you know HOW you trade and what you do when you see the market changing you will have a HUGE advantage over the rest of the retail crowd.

Best of luck

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