In this installment of trading exits, let's look at probably one of the easiest no-brainer approaches to taking trading

profits. This method is going to assume that you already know, in

advance, what your probable maximum loss in the trade is going to

be.

Why "probable"? As I stated in an article on protective stop placements, these orders are placed in the market

(assuming you place them in the market) as stop orders however they

do act as limit orders as they are waiting at a set price to execute.

The reason I say "probable" is because once your stops are hit, they act as

market orders and will be filled at the best possible price which could include

slippage.

This setup gives us a 60 pip differential from trigger to a price point that if

reached, probably is a good sign this move is not going to work at this point

in time.

What we will do is simply use one or more multiples of our risk to

determine profit taking points in the move.

The key point is to ensure you have your initial profit target "in the queue" because in centralized markets orders are filled in a first in first out basis. It

would be tough to see price reach your target, not get filled, and then

head against you.

You can see on the next page that price rockets through the profit target and banks you 60 pips worth of profit.

The question now is how do you handle your position at the exits?

1. Partial profits? 2. All out?

3. Trail your stop?

If partial profits is your plan because you want a runner, how much did you scale out? If you scaled out, did you move your stop? Do you have another profit target in mind for the remaining position?

On the next chart, we have scaled at the 2R or two times your risk ( 120

pips ) and again, what do you do with your protective stop for the remaining

contracts?

Next we have a profit of 3R ( 180 pips )and as you can see, the market turned over and

depending on how you handled this exit and your stop, you made some nice pip

gains on the move.

I want to point out something on this chart though so direct your eyes to the

green highlight. When you see momentum like that, ensure you keep

your eyes open for weakness in the market. On this chart we have the

push, range with bull/bear traps, the final push and a reversal candle which

If you are still holding long after seeing the reversal candle and after taking all

the other information into account, you are about to give back about 170 pips. That is reading price action and

is really outside the scope of this article but can't be ignored.

The beauty of this type of profit taking when trading is that you can be

extremely consistent on every single trade you take. Keep in mind the

following:

1. You must test this on any market you trade. 2. You can add qualifiers such as first target must be below structure support/resistance 3. You can have trading rules dictating what you do with your stop.

Once you have tested it and worked out all the details, the key point is do it

consistenly on every single trade.

Without consistency and changing your rules on the fly, you will find it

difficult to find much success in trading.