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At 06:06 PM 4/28/98 EDT, Mosonny wrote:
>There have been some wonderful posts about money management lately. I am
>working on this aspect of my trading, and am looking for exit
strategies/stops
>that work.
>
>My problem is not so much the initial "fail safe" stop, but figuring out how
>to protect profits. I have been looking at both taking profits at targets
>(eg. Fibo targets), and letting profits "run", and trailing stops, and being
>taken out of the trade.
>
>Any opinions on what works best, or what, for instance, would serve as a good
>trailing stop?
>
>Thanks.
>
>Maurice Sonnenwirth
>
>
Hi Maurice,
I'm in the "take a profit" camp, rather than the "let profits run" camp.
Better to take a calculated profit (at Fib objective) than try to extract
the most from a trend. You can use a close-in Fib objective or an
extended one, based on thrust or other indicators.
Another method of "taking a profit" is to have a trailing stop.
Exiting on a trailing stop (moving average or similar) causes the
trader to sell into a declining market, which has disadvantages
(slippage). If you are not disciplined about applying this method of
taking a profit, or if you let your stop trail too far behind,
you accidently find yourself in the "let profits run" camp ;-)
Taking a profit rather than "letting profits run" makes for more
frequent profits though you miss the big ones. More frequent winning
trades are better for emotional control, ego, cash control,
money-management etc. Increases the winning streaks, decreases the
losing streaks, ( "emotional capital" ).
"Letting profits run" causes traders to let winning trades turn into
losing trades too frequently.
Just one of many diverse perspectives, but it's mine!
-Neal.
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