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EP21: Two Targets vs. One Target and Trailing Stop
In this episode of Truth About FX, Walter discusses about the pros and cons of using two targets alone versus using one target and a trailing stop to maximize profits on the last position. He also points out that it is important to use the method that you are comfortable with and is acceptable within your best interests.
http://media.blubrry.com/truth_about_fx/content.blubrry.com/truth_about_fx/TAFX_-_EP21_Two_Targets_vs._One_Target_and_Trailing_Stop.mp3
Download (Duration: 04:32/ 5.20 MB)
In This Episode:
00:34 – personal preference
01:33 – give back that profit
02:48 – split it up
04:04 – too difficult
Tweetables:
Most traders have a difficult time watching a trade. [Click To Tweet].
It’s up to you decide which choice you’re going to take. [Click To Tweet].
Use a trailing exit if you’re willing to give back your profit. [Click To Tweet].
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Alright, Walter, this is a pretty common question: should I use two targets or one target and a trailing stop to maximize my profits on the last position?
Walter: This is a tough one and it’s going to come down to personal preference. Basically, what will happen is if you use a trailing exit and it’s a pretty good trailing exit and it fits the market and so forth, you will occasionally get this really nice, big, fat winners but you’re also going to get a lot of trades that are like sub par. In fact, the first target that you’ll use might make more profit than your trailing exit under remaining lots on the trade.
This can be, psychologically, really difficult to stick with over the long haul. In general, using two targets — although it may not be the most profitable way of trading. I know it sounds funny but, in other words, if you were to just use a trailing exit and not have a profit target, in most cases that trailing exit is pretty good. You’re going to make more money than in any other way.
The problem is most traders have a difficult time watching a trade. Give them so much profit and then pull back then finally their exit, trailing exit pops you out of the trade. That’s really difficult to give back that profit.
What I suggest is that you either pick two targets as this trader refers to. You have two stationary targets, one is a little bit further — maybe it’s less likely to be hit than the first one — but it allows you to make that extra profit in case when it is hit with maybe two out of ten times or something like that on your winners.
The trailing exit does the same thing, the only difference is you were effectively using the extreme volatility that we see in the markets in your favor. What that means is, in a trade where you get an average of a hundred pips,
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By Walter Peters (FXJake) and Hugh Kimura (Trading Heroes)In this episode of Truth About FX, Walter discusses about the pros and cons of using two targets alone versus using one target and a trailing stop to maximize profits on the last position. He also points out that it is important to use the method that you are comfortable with and is acceptable within your best interests.
http://media.blubrry.com/truth_about_fx/content.blubrry.com/truth_about_fx/TAFX_-_EP21_Two_Targets_vs._One_Target_and_Trailing_Stop.mp3
Download (Duration: 04:32/ 5.20 MB)
In This Episode:
00:34 – personal preference
01:33 – give back that profit
02:48 – split it up
04:04 – too difficult
Tweetables:
Most traders have a difficult time watching a trade. [Click To Tweet].
It’s up to you decide which choice you’re going to take. [Click To Tweet].
Use a trailing exit if you’re willing to give back your profit. [Click To Tweet].
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: Alright, Walter, this is a pretty common question: should I use two targets or one target and a trailing stop to maximize my profits on the last position?
Walter: This is a tough one and it’s going to come down to personal preference. Basically, what will happen is if you use a trailing exit and it’s a pretty good trailing exit and it fits the market and so forth, you will occasionally get this really nice, big, fat winners but you’re also going to get a lot of trades that are like sub par. In fact, the first target that you’ll use might make more profit than your trailing exit under remaining lots on the trade.
This can be, psychologically, really difficult to stick with over the long haul. In general, using two targets — although it may not be the most profitable way of trading. I know it sounds funny but, in other words, if you were to just use a trailing exit and not have a profit target, in most cases that trailing exit is pretty good. You’re going to make more money than in any other way.
The problem is most traders have a difficult time watching a trade. Give them so much profit and then pull back then finally their exit, trailing exit pops you out of the trade. That’s really difficult to give back that profit.
What I suggest is that you either pick two targets as this trader refers to. You have two stationary targets, one is a little bit further — maybe it’s less likely to be hit than the first one — but it allows you to make that extra profit in case when it is hit with maybe two out of ten times or something like that on your winners.
The trailing exit does the same thing, the only difference is you were effectively using the extreme volatility that we see in the markets in your favor. What that means is, in a trade where you get an average of a hundred pips,