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Dhiraj Kothari:
>can someone please guide me with some ideas or literaure regarding
>optimum/good/practical ways to set profit targets?
Here's what I think.
First you have to determine if the market you're trading has a
tendency to trend or a tendency to swing. Currencies, for example,
are historically trending markets. Indices like the S&P are
historically swinging markets.
For trending markets, profit targets don't help you.
My own experiments indicate that profit targets will improve the
return of a trading system in swinging markets.
My experiments also indicate that it's better to exit all at once,
and not "scale out" of your position at different profit points.
You might think that you're "insuring" your profits, but what you're
really doing is insuring that you have your largest position when
you make a loss and have a minimal position when you make your
biggest gain. This is dangerous.
As for an optimum way to set targets, that's a matter of
experimentation. You can set a constant target, or do something
based on market noise or volatility.
--
,|___ Alex Matulich -- alex@xxxxxxxxxxxxxx
// +__> Director of Research and Development
// \
// __) Unicorn Research Corporation -- http://unicorn.us.com
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