Tuesday, June 4, 2013
Profit Targets and Stops
I feel this is the hardest and maybe least talked about topic of trading, which is when to sell. You always hear the adage or ride your winners and cut your losers...well how long do you ride you winners for? For portions of my positions, I like to use a margin profit percentage. Say for example I have 2 contacts on Orange Juice. I would like to scale around anywhere from 50%-100% or profit on the first contact, normally around 75% or so. The other would be held until the trend changed or I had a profit of 300%-600% or margin profits. This is based on experiences and feel, but how I determine when to sell for a profit. I use wide stops for my longer term holds, and tighter ones for the contracts I want to scale out of or trim and trail. The idea is to always be holding long if the trend is up, and position size accordingly to where your stop will need to be. I will go into much broader detail later, just wanted to give an intro into this concept.
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