Thursday, April 23, 2015

A decent trend gives its reward

Today saw the end of one of our most profitable trades in recent months. The chart is shown below. Again, all the basic criteria that we look for were present in the set up prior to entry, and once we were in the trade it was simply a question of focusing on our trailing stop and dragging it along.

As with all such trades, when opening the position you never know:

a) whether the trade will generate a profit or a loss, and;
b) how far will price will move should it go in our favour.

We don't make predictions, or favour one set up or trade compared to another. We risk the same proportion of our equity (in percentage terms) on each set up taken. And while we are very aggressive in cutting losses, we do not use any profit targets, as they may limit the profitability of a trade.

On all trades taken, we can only control the elements that we have control over. These include:
  • what price level to enter the position;
  • what our level of risk on the trade is, and our position size, and;
  • where we place our stops to denote an exit from the trade.
Even then, we are not fully in control, as price can on occasion gap down through a stop level, meaning we lose more than we intended to risk on the position.

Occasionally, a pronounced trend develops and the resulting profit covers a lot of the small losses incurred and more. What we did was simple, but not necessarily easy - a lot of traders tend to snatch profits off the table for fear of losing them. What trend followers do is allow the winning trades to run their course. The end result here was a profit of just over +8R.

If you'd like to know we scan for opportunities like this, and develop the risk management and mindset to allow you to profit from trades like this, then come and join us in our group.

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