The Lost Art of Discretionary Trading – I
“Limits limit profits”. I had not thought or heard of that saying in awhile. It’s a trend traders mantra and refers to the hardest thing in trading to do, which is let a profit run. If you place a limit order to exit the trade then you must not have a conviction that you are going with the trend.
I do a lot of work with my clients in live markets and the 2nd question I inevitably get from a new client after pointing out a set-up and trigger is “where do I take a profit?” I shake my head every time because it tells me the individual is more familiar with a mechanical system than a behavioral method, and may not understand how to differentiate between a trending market and a counter-trending market.
There is nothing wrong with taking a PORTION of your position off at predetermined structure, or even at a specific pip amount, particularly if you are day-trading. But even as a day-trader if you are taking signals in the same direction of the intermediate term trend on the time frame you are trading, or in the same direction as the current trend on the next higher time frame, you need to start to consider only taking a portion of the trade off on the limit order and allowing your profits to run. Something we all understand is that markets often move further and faster than the crowd initially thinks. My job is to get you thinking about taking advantage of that tendency.
Jay Norris is the author of the best selling book Mastering the Currency Market, McGraw-Hill, 2009, and a Senior Market Strategist with BrewerFX.com
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