The importance of taking profits

Under one of the golden rules of trading: ” you have to cut your losses quickly and let your profits run ” are many traders who belittle the importance of first determining the point of take profit ( profit taking ) of an operation thinking that what is really key is to set the stop loss ( stop loss ) and believing on the go will be able to get out so gracefully.

But, how many operations have seen their profitability by not having defined profit – taking? , How many times have prevented emotions close a deal with the expected benefits and achieved rather than the small part achieved? There are several reasons that lead to this end:

In some cases, the belief in the ability to intuit ahead of the turning points are left out “virtual” benefits, causing a feeling of frustration.

In others, the fear of losing the benefits they are getting leads to early profit taking caused by the lack of security in the plans designed and ruining the risk / benefit ratio of the overall strategy.

And in some others, the lack of discipline and greed clouding the minds of traders in an operation that develops with substantial benefits, prevents closure thereof at the point planned to wait a Utopian benefits “infinite” and causing a decrease in the expected return.

What techniques can help not reach these situations?

Theintentionality of operations , as noted in the article Dr. Brett Steenbarger with a plan thoroughly prepared to guide decisions to run operations as opposed to acting impulsively, itnot established what we and why, will be one of the decisive points. The difference between planning or operations gives us the advantage of being proactive in risk management and control across the disadvantage of being reactive to market acontencimientos. The d esign and implementation of an operational tactic , which was described in the article “Tools: Trading Plan”

and detailing: the market and temporal scales (what and duration), the market context (why and rationality of the “opportunity”), the input (at what price), the size of the position and protection (how much we will risk), the target profit (what is the reward) and management of the operation (what alternatives will take and under what conditions), it helps eliminate the need for ego to be right transferring this responsibility to plan .

One of the reasons for not respecting the approach provided the aptly describes William Eckhardt (known by the experiment turtles) in New Market Wizards, when he says “Traders often tend to give too much importance to an operation, regardless it is only a small part of a whole strategy and should be treated emotionless. When an individual operation is so important you tend to do things to work that often worsen the situation “.

The patience and discipline in the development of the executed operation, based on trust with our trading system or method should give us the courage to faithfully following the intended plan whatever the outcome.

Development and effective implementation of techniques for profitable trading requires a trader involvement is essential because work learning and training with great rigor. To do this, it may be useful the experience of others, reading books and blogs, attending courses and seminars … but without the firm conviction, perseverance and dedication of the trader be entirely useless.

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