High Probability Trading Strategies - How To Take Profits
By Dave Lex
There are a lot of problems to solve with exits. It is only through your exits that your strategies will become high probability trading strategies because it is where your profits will be made. If your worst case does not happen (that is you do not get stopped out), then the job of your system is to allow you to make the most profit possible and five the least amount of it back. Only your exits do this.
Consider using different exit strategies for each of your system objectives. As you design your system, keep in mind how you want to control your reward-to-risk ratio and maximize your profits using the types of profit taking exits described in this article.
Percentage Move Stops
A percentage move stop will tell you how much it is okay to risk on a trade but should be used only if it is technically feasible. With a percentage move stop one can use the market itself as a way to figure out the most one is willing to risk per trade. Ways to figure out how much to risk in a market can be based on a percentage of true range, a standard deviation move of the market or a percentage of the exchange margin requirement.
Time Stops
Stops do not always have to be set by the market or be based on how much money you can afford to lose; they can also be time stops in which you give the market a limited amount of time in which to work out. If it doesn”t, you get out. Time stops depend on the time frame one uses. For a scalper, it can be 10 minutes; for the intermediate day trader, it can be 45 minuted and fora position trader, a 5 day stop may work.
Technical Stops
Here is a proper way to place your stops - Let the market tell you where it should go. Stops that are based on what the market suggests is a good place to let you know you are wrong are the best stops. The market doesn”t care how much a trader can afford to lose; its going to do what it wants to do. Technical stops should be placed at where your trade would be invalidated if price were to go there. For example, if you were to trade a consolidation breakout system, then you would place your stop at the opposite range of the consolidation, where it would mean that your trade would most probably not work out.
There are many other stops that work well as well and these are the few stops which i personally used and have been doing very well at them. However what works for me may not be so for you. Therefore it is important that you test them out before you actually implement them in your trading strategy. I hope you have benefited from this article of high probability trading strategies.
About The Author
Dave Lex is a full-time trader and trades the forex and the US stock and options market. He also constantly test and develop trading systems to share with the public. For more information on how you can get one of his high probability trading systems for free, go to http://ProvenTradingSystems.com