I will start with the usual and obvious answer first ! It’s never wrong to take profit – it’s good for the soul, the confidence and pays for the next round of drinks, or golf or holiday ?!
However in strongly trending markets where you been smart (or lucky ?) to be on the move but stongly believe that we have further to go…well, what to do ?
Case in point being the USDJPY; now we all have different goals and parameters and expectations, different risk management and account sizes.
However managing a position can sometimes be a challenge even when you are ‘in the money'; take all the profit and look again, then another swift move that you miss gets you kicking yourself, you hop in again and realise you have now bought at the top of what becomes a decent reversal, then you kick yourself again take your loss and become very miserable : you have given away a good proportion of the original profit.
My own strategy is this: if I am playing the trend with a modest position I stay with it and merely make sure I can afford a fairly big stop where it will be trend changing – on the dips I will just add more; or, if it is a sizeable position it always good to take a slice of the table, improve the average and look again, that way you can keep in the position for the next run up.
I just took some of my long USDJPY out having been long and adding to it constantly; less stress, better average, money in the bank, and being a momentum trader when 95.60 clears and later after NFP it looks like a strong weekly close I will then re-buy ready for the next move up.
And for those who will be worried about the NFP swings, take profit and look again: why get wiped on a lottery coin flip ?
PS. as you get further into the trend start using protective stops…why give too much away, you can always reinstate.
Hope this helps some of you. Happy trading
