If I didn’t take profits as often as I do – I seriously doubt I’d be this far ahead. There are few worse feelings than seeing a trade go well into profit, waking up the next morning to see – that not only has the profit evaporated, but the trade has actually gone against you. Volatility in forex trading can be an absolute killer (not to mention greed) – so when profits are sitting on the table…..you’ve got to learn to take them.
Take the long JPY trades over the past 24 hours for example. I went short CAD/JPY (so…looking for JPY to gain strength against CAD) and caught a 100 pip move over a 4 hour period. That’s what I call a really nice trade.
Seeing the “waterfall” type selling pressure in the pair, I knew from experience that this type of market behavior doesn’t “last forever” and would likely be followed with a bounce in the opposite direction. I exited the trade with a full 100 pips profit with absolutely no concern as to “what I might miss” in further downside movement – if I’d remained in the trade.
Here we are a full 24 hours later – and the pair has 100% completely retraced the entire 100 pips from yesterday.
Take Profits Often When Trading Forex
You can never go wrong taking profits – never. As well, by keeping yourself relatively nimble you are also equipped to take additional trades or (such as in this case) re-enter the same trade at even better levels.
Learning to distinguish “when/where” to do this does take practice, but if you keep in mind that you are continually growing your account balance as well as limiting your exposure in the markets – taking profits often (very often) should become a regular part of your daily trading.
I rarely leave money sitting on the table – as there is always another trade. Take the money – call it a trade ( a good trade ) and get back out there with a little more gas in the tank.
Kong,
Great advice, but the tricky part is still to know when to hold and when to fold and take profits. I use partial profit takes and trailing stops to ensure I get a good slice of any move, but unless you sit in front of the damn screen all day you can’t maximise them. I find short term signals are not great for predicting changes in trend as its usually intraday noise instead, which makes it hard to “let your winners run” as the experts suggest.
Bingo Deano.
Its a bit of “an art” – that’s for sure. I’ll generally knock up a time frame or two and see where reasonable areas of S/R are, and if these are respected – then great, Ill stick to the trade. Otherwise….if I see some kind of “blast” against me – boom….Im out.
Looking at the example in CAD/JPY – we can see that the full 100 pip retracement didn’t do a speck of damage to the overall downtrend (at least in my view) and if anything…. provided an absolutely excellent re-entry “short” as I just made the same trade yesterday.
Even as high as a 4H chart the series of lower lows and lower highs is still very much intact. Volatile – but intact.
Great input man – thnx
G’day Kong!
Great post! Exit strategy has been a weakness of mine literally since the day I was born. I almost always stick around too long in a good situation that turns, usually neutral at first, then bad.
This year, 2013, my resolution is to change that trend. As you point out, in trading, good exits are a must, literally do or die. So thanks for the positive suggestions. And hey, I did manage to get the heck out of Thailand… just before the sweltering heat arrived… though I must admit, I had to literally trick myself into packing the bags and going to the airport. Good exits on trades should be much more straightforward, though, as I’m sure you know, we humans need all the help we can get in overcoming our not-so-good habits.
I am currently 100% in cash. I see no clear trend in place in SPX, other than slowly rising; precious metals — I expect sideways movement, perhaps even for several months. Europe is on the verge of recession. Emerging markets far too risky. The only clear movers I’m aware of at the moment are Japan and Natural Gas.
Would you agree the counter trend rally in the Yen and probably the Nikkei is over now, time to get back to shorting the Yen, probably going long Nikkei? I wish I had immediately gone long DXJ the moment I exited my short position yesterday morning. Come to think of it, should have gone long Natural Gas, as I knew it would go back up… just not so quickly as it did!
I’ve been watching the Yen drop all morning in Asia. The Nikkei put in a reversal and is up slightly at 1:30 pm Japan-time. Kuroda will address the Japanese parliament tomorrow, in the overnight from Wednesday to Thursday in the Americas. BoJ policy meeting next Wednesday/Thursday.
Qualitatively, it looks as though the market is now beginning to figure in Yen weakness and Nikkei strength.
Quantitatively, what does your tech analysis suggest?
Cheers from Taiwan, a full 10-12 Celsius cooler than Thailand…
eternal spring continues…
zkot
I just don’t see it Zkot as my reload on JPY long’s has now turned into a big winner here this morning.
I’ve stuck with the trade here all week – and am again rewarded here today, as well I’ve been long UNG for several weeks now.
Thanks for the reply Kong! Amazing Yen AND Dollar strength… perhaps a risk off move all round?
I don’t know. I don’t have the surfing skills to ride this counter trend wave as well as you… but I’m certainly watching and learning!
Do you plan to change course by the end of the week?
Meanwhile… I was ready to go with a day trade in AGQ — 38 calls — after silver’s plunge in the overnight. A gap was set up between 28.30 and 28.60 — I jumped right in. Didn’t quite get in at the bottom, as I was fumbling around with internet connection while the price was rising rapidly, but I did manage to buy just as the market was resolving itself. As soon as silver hit 28.60, I bailed — not sure if it is gonna continue up today, but I do not care, as I had your current article firmly in mind!! I chalked up a “W” in Silver for the first time in several months!
I am also in GDX puts — bought in right after selling out of AGQ. I believe that stocks and miners are trading at a divergence. I believe the stock market, despite morning weakness, wants to push higher. If stocks keep pushing higher, miners will keep pushing lower.
Finally, wow! Congrats on jumping on the UNG trade several weeks ago. That has been a winner since mid-February… I am finally wrapping my mind around it. Impressive upside since Monday afternoon!
Two questions: Do you take profits frequently there as well?
Are you looking at tomorrow morning’s inventory report as a potential buy in?
Thanks again & keep trading!
Cheers ~ zkot
The volatility in the JPY pairs are making it very , very difficult to ride – for myself as well.
I´ve already taken profits here this morning AGAIN – and am “trying” to get back in to the trades but its absolutely nuts out there!Catching “momentum” is tough as nearly every reasonable move (of 50 pips or more) is almost always 100% completely retraced.
I’ll just as likely ditch it here – if I don’t get a continued move. Frankly – at times my patience wears out too.
I’ve also sold my UNG calls here this a.m.
My trade entries / plans often take several days to fall into place, and I rarely “stop and reverse” so……even if I consider things moving back towards “risk on” – I likely wouldn’t be doing much about it tomorrow. I won’t be touching PM’s in any way shape or form until I’ve seen many, many, many fundamental market dynamics fall into place.
Hi Kong!
Thanks again for your reply. Very interesting. I hope you managed to hold onto your positions overnight… you will be pleasantly surprised when you wake up. Kuroda spoke before the upper house of Parliament in Japan, merely reiterating what he said two days ago. Markets were utterly unimpressed. So the countertrend continues.
As for the metals, I’ve been avoiding them, too. But that gap in silver in the overnight was just too obvious! When support held at 28.20, it was fairly certain that silver would not break down, but rather fill the gap.
Going short in miners looks like a bad idea so far, but actually, it wasn’t. There was a point when I could have gotten out profitably… the lowest dip on the GDX chart after the first peak… but I got a little too greedy. Still, there may be hope today. Gold is failing to pierce the upper daily cycle trendline, much less 1620 — looks lackluster all round, maybe even trending down the past few hours.
There was a better trade out there that I was unaware of: Just how strong the reversal in stocks was yesterday morning: SPX bounced off the daily cycle trend line.
As I watch S&P futures in the overnight, I see they were down after New York closed, then bounced strongly off the trendline around 1 a.m. EST. What I find interesting for Thursday trading is that whereas the last two bounces off the lower trendline have occurred during New York hours, this latest one occurred in the middle of the night. S&P futures have tried twice to break the 1650.45 upper resistance — unsuccessfully. Once they break that resistance, I believe the upside move will be dramatic. I definitely want to be in that trade! (on the right side of it, too!).
As for Nat Gas, I agree with you on the fundamentals. You are probably already aware of this, but potential buy in dip normally occurs Thursday morning at 10:30 EST, when the Nat Gas report is released. If there’s a dip, it probably will occur very quickly.
Otherwise, taking a hard look at FB, which appears to have bottomed and may be emerging.
Hope you have a great Thursday!
Hi Kong,
I recently stumbled on your site and have learned a lot from it. I noticed today that you’ve been trading natgas. It’s already had quite a run – wondering what your thoughts are about it going forward.
Thanks for all your nuggets of trading wisdom!
Hi Lindy.
Thanks for stopping in here – I appreciate it.
On a purely technical level – after a long and slow bottoming process, it looks to me that Nat Gas has most certainly made a solid turn to the upside. It’s looking at some near term resistance here after this run – but in a broad sense, I feel it’s bottomed AND has made the upside turn.
Fundamentally I like the story too so…….perhaps watch for a pullback / dip buy opportunity. I don’t follow these things “quite” as closely as I do currencies, but have had my eye on commodities for some time now, patiently waiting for the right time to buy.
I feel we are close – across the board.