Monday, November 28, 2011

Take Profits

There is absolutely nothing wrong with taking profits. When you are correct on the direction of your trade, you are wise to scale out and trail your stops. This strategy reduces your overall risk and makes you stay alert while your trade progresses. I have seen way too many times how traders get complacent and turn a winner into a loser.

While I am not teaching you how to trade, and respect everyone's style, my notion of taking profits comes from a deep respect of market's ability to fool most traders most of the time.

Let's look at possible scenarios of where "fooling around" will take place.
SPX has traveled the distance of entire air pocket, which lies between 1156 (gap fill) and 1195 resistance. Oil has ran into the $100 resistance. AUD/USD has unsuccessfully tried to take out the parity level. And EUR/USD has fiddled with 1.34 and failed.

Perhaps this is just a pause and late-day rally takes those levels out. You will still have the remaining portion of your original position to capitalize. Perhaps I do not know a thing about trading. Perhaps I am a trading genius, and just want to show off. It all does not matter. What matters is the fact that @ 11:50 am on Monday, after the worst Thanksgiving week since 1932, we are up 3% in a schizophrenic market environment, where an article from little-known Italian newspaper can be a culprit for world-wide short covering. You wanna guess when the next rumor article comes out?

Take partial profits and trail your stops!!

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