Last week’s article led to a great question on twitter.

<image: Why Did I Take Partial Profits So Early?>

Yeah, fair call.

It does look ridiculously early.

Here’s the trade we discussed in that article.

<image: Why Did I Take Partial Profits So Early?>

Here was my reply:

<image: Why Did I Take Partial Profits So Early?>

Let’s step through the entry and early trade management decisions.

The vertical axis is a little compressed on the 1 minute chart so we’ll do this on the 15 second lower timeframe chart.

<image: Why Did I Take Partial Profits So Early?>

<image: Why Did I Take Partial Profits So Early?>

<image: Why Did I Take Partial Profits So Early?>

<image: Why Did I Take Partial Profits So Early?>

<image: Why Did I Take Partial Profits So Early?>

Why would I exit like this?

Why not just go all-in all-out targeting the further target area?

Simply because not all trades follow through to the ultimate target area.

<image: Why Did I Take Partial Profits So Early?>

<image: Why Did I Take Partial Profits So Early?>

<image: Why Did I Take Partial Profits So Early?>

There is no need for comments as to “Why didn’t I trade here?”. Or “Why didn’t I manage that trade in this different way?”

We can all see with hindsight where the opportunity is.

But this is the reality of the game. Not all days provide your favourite structure or conditions. And even if they do, not all days will be traded well (especially Fridays for me lately as I’m getting tired towards the end of the year).

But here’s the point…

The 1st exits profited nicely.

The 2nd exits lost money.

Profits overall, on a day when I couldn’t catch anything that moved beyond the first target.

Had I been operating in expectation of larger targets, instead of working with my quick partial exit and run the remainder, I’d be sitting on a loss for the day. Not a profit.

It may well be mathematically optimal over the long-term, to trade all-in all-out and target a more distant exit.

But I’m more interested in the short-term. The day-to-day grind. Taking something out of the market on days that not only follow through to the ultimate target, BUT ALSO THOSE WHICH DON’T.

From a shorter-term day-to-day perspective, there will be some days when the first exit will perform the best. And some days when the second exit will perform the best.

An easy way to think of it is that I’m diversifying across both trade management approaches. Accepting that I may at times underperform, if hindsight shows that the market did expand. But also at times outperforming, when range and follow-through is limited.

It’s not right or wrong.

It’s just what I’ve found best “fits” my personality.

Whatever works best for you, is fine by me.

Happy trading,

Lance Beggs

 


 

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2 Comments

  1. “From a shorter-term day-to-day perspective, there will be some days when the first exit will perform the best. And some days when the second exit will perform the best.”

    The key is consistency in the trades made!

    Good article, thanks Lance.

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