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When to Take a Profit Early?

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This is an area of my system I have contemplated and have not found a consistent rule for. I would like everyone's opinion, (granted only about 5 people ever participate in this idea lab, I value everyones opinion greatly.)

While target prices are subjective, I find myself pulling the trigger early on a portion of the position (to lock in profits) or letting  a bounce get away from me and fall back close to my stop price. So...

Do I take some off the table when my profit reaches a certain number no matter what (say at $200 profit i always sell 1/4 of my positon)? Or do I hold more of my position letting the winners exceed the losers that started as winners? I'd love some input!

- tim

Submitter: MustangCarter MustangCarter (Ideas, comments)
Category: Stocks
  1. 0 Buys, 0 Sells rate down rate up
    This is the very same point I'm at with the system I'm using. I'm absolutely confident in the systems ability to create great entry points but knowing how far to let the profits run is always difficult. I'd suggest doing a statistical study of your own past trades using the system. You're very likely to find some common areas of resistance (or support if shorting) that tend to hold in your unique situation which you can use to take partials/exit. When you know the probability of your winners running to 2R, 3R etc versus the win/loss ratio (obviously this will become smaller as you increase the R value) you can then decide whether you're comfortable letting them run further (if the statistics suggest it's a good idea)
  2. 0 Buys, 0 Sells rate down rate up
    I can get a fairly good idea of a stocks range of movement (as a percentage), based on looking at a chart. For longer term swing trades, I set my targets as a percent from my entry point. I would only take profits if it broke my trailing stop (from some set moving average, not the price) before reaching the profit target.

    For day trades, my method is different. I work off of pivot points to find an entry point. I am now familiar enough with the stocks I day trade to know how far the price usually will run from the pivot point. I only day trade stocks that I have watched and have an understanding of their typical behavior.

    http://acekingtrader.blogspot.com

    http://www.pivotpointcalculator.com
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