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| USDCHF H4 |
Because the market was up trending when I shorted it, it is hard for the mind to believe such a big move down is possible. When I took the trade, I kept telling myself better be careful with this one because it is counter trend. I managed to persuade myself to TP when price formed a M30 pin bar off a M30 demand zone. Now herein lies a very important lesson. If you took a trade based on a H4 zone, DO NOT TP early until price hits an opposing H4 or higher zone. If your read is right, price should do just that. This is how many professional traders make tonnes of money, they enter as a scalper but hold as a position trader. They find low risk opportunities to take a trade on the LTF, but select their target based on the HTF.
What I should have done was to simply move my stop to BE instead of TPing early. Again I broke my own rules and got shaken out early. Look at that sharp move down, my simple rule of trailing the stop behind each supply zone would mean I have at least 6.5R of profits locked in now. In fact, I would have been 12R in profits at the lowest point. A freaking 24% increase in the account.
I also want to take this opportunity to discuss a very popular method of trade management - Taking partial profits at the first trouble area and trailing the remaining half. Two of the best traders I know (Redsword and Julexo) do that, many others do so too. However I'm still not convinced that it is the best way to manage a trade. No doubt partial TPing is very mentally and emotionally assuring as you're guaranteed of a winning trade. However, I believe that expectancy wise doing so is inferior to trailing the entire position. Just look at this USDCHF trade and my previous GBPCAD trade. Trailing the entire position would have resulted in a lot more profits. Indeed I will have a lot more BE trades if I do not partial TP, but I truly believe the profits from these runners will be far greater than those who only let 1/2 or 1/3 of their position run. Again who am I to correct those legendary traders, but like everything in life, the way to convince yourself of something is to test it out yourself. That is what I'm doing, if over time I'm convinced that trailing the entire position is more beneficial for the expectancy than partial TPing, heck that is what I'm going to do.
Each day goes by with me believing my dream is possible. The greatest obstacle to that is the man in the mirror, because I keep sabotaging my trades. The thing is this, we need runners to offset our losses and create that massive growth in the account. It is of paramount importance that we really let our winners run. How many more times must I commit the same mistake before I conquer this fear?
hey man
ReplyDeletei've been following your blog for a few months.
Great posts!
ironically i found your blog by googling 'james16 partial profits'
because i also had doubts over taking partial profits previously.
but guess what, I achieved james16 minimum requirement 1 : ON DAILY AND WEEKLY TIME-FRAMES, YOU ONLY DEMO-TRADE FOR THREE CONSECUTIVE PROFITABLE MONTHS IN A ROW.
(took me about a year of trying)
incidentally that's when i tried taking partial profits.
on demo, i achieve average of 6% return per month. only trade 1-2 times a month. held partial profits for as long as a few weeks
holding weeks may not sound sexy but it worked
I'm now trying to achieveat minimum requirement 2.
Hi there thanks for following my blog ;)
ReplyDeleteMan I got so much to say about this subject, to be honest it isn't exactly fair to examine a trade management strategy without also considering the trading method and risk management aspects. For etc if I'm not mistaken James16 risks 3% per trade, which is pretty darn high. As such he is inclined to move his stop to BE and take partial profits real soon because his priority is to maintain a high win rate (even if the winning amount of each trade isn't high). He cannot afford to take full bar losses because 3% of an account is huge. So ya he teaches partial TP at FTA, but even after he has taken partial profits, the remaining portion which he is trailing is still a decent sized position because he risks a lot on each trade. This works out for him.
However if another trader is trading a system which risks only 1% per trade, has a low 30% win rate and depends on big runners, I doubt partial profits will work very well for him. Of course all this is just my personal speculation and is untested.
I guess the best way is to test the various management strategies out and find out which works best. I try to keep track of my trades even after they're over to determine which management method would have worked the best, still in the process of experimenting :)I figure this is a never ending process which might take years to finesse.
Admire your discipline to wait for the best setups, am definitely not patient enough to trade only 1-2 times a month and hold for weeks :P 6% a month consistently is great, compound that and you'll double your account in a year! :) Btw are you familiar with supply/demand concepts?
Hi Myst1z
ReplyDeleterisking 1% is good advice when starting out trading but when the trader has the skill of trading and treats it as a business, staying at 1% risk is risky.
IMHO, the only people who can trade 30% or low win rate systems are professional money managers and automated forex systems, because they are trading 'Ah Gong's money'.
But for a self-funded trader, he will start to doubt the system after a few consecutive losses, even if he has a 80% win rate system.
anyway, win rate and risk reward are 'after the fact' tools. good for evaluation but have no real value for the next trade. also, by setting risk reward before a trade, one is going against the rule of letting profits run.
It's not that I'm patient to wait for the best setups. I think the process I went through is the similar for james16 followers. I traded 15mins, then 30m, and 1hr, then 4hr timeframes. after lots of trades and no results, i finally 'get it'.
I'm not familiar with S/D concepts but i think my trading style is not too different. one extra step i took is to look beyond the charts and consider who's gonna make price move after my entry since every good trader knows where to find confluence.
cheers
hi Myst1z ,
ReplyDeleteGreat information found in your blog. I am really impressed your reasoning.
Regarding the stacked zone. you can divide the positions by number of stacked zones and place it in each please . stop loss shall be above all. To do this daily supply or demand also need to be checked.
Hope it helps.