Systemizing profit taking for me, with some nuances highlighted; 1. Entry Day = Day 0, 3 stops at 33% level to final stop (usually LoD). 33% net size at each level. 2. If profit to risk exceeds 2x in day 0-2, i will shave 33% off. all 3 stops level will be maintained, have size adjusted to the net balance qty. I have highlighted several post on managing risk with 3 segregate stops to reduce your 1R loss even 0.6 to 0.8R. 1R loss is not 1R, more often than not it is 1.03 to 1.3R with slippage, spread, borrwing etc depending on liquidity of the securities on average period, and at time of explosive move u saw it is already making. 3. Day 3 = 33% size down (immediate partial profit taking or shaving risk down on trade that did not follow through but still hovering above avg entry as I have tight stops (since I only do execution when price action presents entry to LoD below 60%). All stops are consolidated to breakeven level on 1 full singular size. 4. Day 4 onwards is all mental stop on 10-MA. I do not mess with the trade if it doesn't close below 10-MA. eg. If close below 10-MA on Day 8, stop remains at breakeven level on Day 9 and I will let market trade for a opening range of 5 minutes and adjust my breakeven stop to the low of the opening range (ORL) and let it the market take it out. If stop not taken out by EOD of Day 9, during pre-market routine i will adjust back to breakeven, and reset new ORL for Day 10. I repeat this process until it get taken out. The rationale is to hold onto your winning trade as long as possible with minimal sacrifice or unrealize profit. Study my $XLU entry on 9th July. I'm still holding, and even added along the way up today (86 calendar days and running). 5. Some nuances to consider; i) if I were to take a catalyst gap trade eg. 1/10 (Day 0) $UNFI +100% surprise beat in EPS and intraday hit 10 x ATR% extension to 50-MA. When $UNFI hit 2x profit-risk in full size within 25 mins of the trade, I take 33% size off. It continue to follow through and hit 10 x ATR% extension from 50-MA. It is extremely unlikely for me to even be aware of this because I usually shut off after 3 hours from open and let my stops take care of my open heat risk. I will let Day 1 open and size down further 33% of net size as partial profit taking. When a trade ran up exceeding 4x profit to risk before my Day 4 breakeven, i will definitely consolidate all risk to a singular stop at breakeven. I am taking the risk of losing the remaining unrealized profit but it definitely don't make sense to visit losing range (below entry) by maintaining stop at 33%/66% and LoD stop at this parabolic point. ii) if i were to hold a swing trade beyond day 4 (all stops already consolidated at breakeven with partial profit taking already taken place), and trade continue to trend much faster than 50-MA to give me a 8-10x ATR% extension from 50-MA, this is a partial profit taking alert for me to sell on strength. eg. size down 33% of net size and readjust breakeven stop quantity accordingly. stop is always at breakeven with mental stop at 10-MA. iii) if Day 0 entry executed, and hit my first 33% level stop or even slice through to 66% level stop (2 stops trigger) before Day 4, i will always adjust a horizontal price alert to previous day high (the stop day), and if it trigger, i will add size inverse pyramid method (eg. 10,000 shares in, 6,666 shares stopped out and nett 3,334 shares. I will add 50% of 3,334 size (1,667 size) bringing me back to 50% net size instead of 33% net size). By doing so, if trade turn south to LoD stop on the singular day, u will not be hit risk exceeding 1R even with attempt to re-scale back up. iv) In holding a trade beyond Day 4 (with consolidated stop at breakeven at nett size), if there were to be a sideway price consolidation setup below 4x ATR% from 50-MA, i will inverse pyramid add 50% size of my nett size. @Qullamaggie treat it as a separate new setup but i prefer managing the same ticker as a single trade. By adding smaller size up this way, your avg price to the trade will not be severely disrupted and will bound to be below your 10-MA mental stop. You can continue to trail the trade like it was but with more potential profit trajectory to the trade. v) gap down open occasion below 10-MA, the routine i take is the same as 4. on ORL. The way I manage profit sizing and adjust stops in a sequential manner is aimed at reducing monthly drawdown % and achieving a smoother equity curve on a MoM basis. As your equity grows (especially when it surpasses your absolute dollar risk tolerance relative to your monthly expenses), seeing unrealized profit drop from, say, +$500,000 to +$280,000 in a single session can be hard to handle, even if you're following textbook rules. I believe not many can emotionally withstand holding 8-10 full-sized trades with 80% portfolio utilization, especially when trading with a bankroll that significantly impacts their quality of life and that of their dependents.
Systemizing profit taking for me, with some nuances highlighted; 1. Entry Day = Day 0, 3 stops at 33% level to final stop (usually LoD). 33% net size at each level. 2. If profit to risk exceeds 2x in day 0-2, i will shave 33% off. all 3 stops level will be maintained, have size adjusted to the net balance qty. I have highlighted several post on managing risk with 3 segregate stops to reduce your 1R loss even 0.6 to 0.8R. 1R loss is not 1R, more often than not it is 1.03 to 1.3R with slippage, spread, borrwing etc depending on liquidity of the securities on average period, and at time of explosive move u saw it is already making. 3. Day 3 = 33% size down (immediate partial profit taking or shaving risk down on trade that did not follow through but still hovering above avg entry as I have tight stops (since I only do execution when price action presents entry to LoD below 60%). All stops are consolidated to breakeven level on 1 full singular size. 4. Day 4 onwards is all mental stop on 10-MA. I do not mess with the trade if it doesn't close below 10-MA. eg. If close below 10-MA on Day 8, stop remains at breakeven level on Day 9 and I will let market trade for a opening range of 5 minutes and adjust my breakeven stop to the low of the opening range (ORL) and let it the market take it out. If stop not taken out by EOD of Day 9, during pre-market routine i will adjust back to breakeven, and reset new ORL for Day 10. I repeat this process until it get taken out. The rationale is to hold onto your winning trade as long as possible with minimal sacrifice or unrealize profit. Study my $XLU entry on 9th July. I'm still holding, and even added along the way up today (86 calendar days and running). 5. Some nuances to consider; i) if I were to take a catalyst gap trade eg. 1/10 (Day 0) $UNFI +100% surprise beat in EPS and intraday hit 10 x ATR% extension to 50-MA. When $UNFI hit 2x profit-risk in full size within 25 mins of the trade, I take 33% size off. It continue to follow through and hit 10 x ATR% extension from 50-MA. It is extremely unlikely for me to even be aware of this because I usually shut off after 3 hours from open and let my stops take care of my open heat risk. I will let Day 1 open and size down further 33% of net size as partial profit taking. When a trade ran up exceeding 4x profit to risk before my Day 4 breakeven, i will definitely consolidate all risk to a singular stop at breakeven. I am taking the risk of losing the remaining unrealized profit but it definitely don't make sense to visit losing range (below entry) by maintaining stop at 33%/66% and LoD stop at this parabolic point. ii) if i were to hold a swing trade beyond day 4 (all stops already consolidated at breakeven with partial profit taking already taken place), and trade continue to trend much faster than 50-MA to give me a 8-10x ATR% extension from 50-MA, this is a partial profit taking alert for me to sell on strength. eg. size down 33% of net size and readjust breakeven stop quantity accordingly. stop is always at breakeven with mental stop at 10-MA. iii) if Day 0 entry executed, and hit my first 33% level stop or even slice through to 66% level stop (2 stops trigger) before Day 4, i will always adjust a horizontal price alert to previous day high (the stop day), and if it trigger, i will add size inverse pyramid method (eg. 10,000 shares in, 6,666 shares stopped out and nett 3,334 shares. I will add 50% of 3,334 size (1,667 size) bringing me back to 50% net size instead of 33% net size). By doing so, if trade turn south to LoD stop on the singular day, u will not be hit risk exceeding 1R even with attempt to re-scale back up. iv) In holding a trade beyond Day 4 (with consolidated stop at breakeven at nett size), if there were to be a sideway price consolidation setup below 4x ATR% from 50-MA, i will inverse pyramid add 50% size of my nett size. @Qullamaggie treat it as a separate new setup but i prefer managing the same ticker as a single trade. By adding smaller size up this way, your avg price to the trade will not be severely disrupted and will bound to be below your 10-MA mental stop. You can continue to trail the trade like it was but with more potential profit trajectory to the trade. v) gap down open occasion below 10-MA, the routine i take is the same as 4. on ORL. The way I manage profit sizing and adjust stops in a sequential manner is aimed at reducing monthly drawdown % and achieving a smoother equity curve on a MoM basis. As your equity grows (especially when it surpasses your absolute dollar risk tolerance relative to your monthly expenses), seeing unrealized profit drop from, say, +$500,000 to +$280,000 in a single session can be hard to handle, even if you're following textbook rules. I believe not many can emotionally withstand holding 8-10 full-sized trades with 80% portfolio utilization, especially when trading with a bankroll that significantly impacts their quality of life and that of their dependents.
@jfsrevg Jeff this is absolutely gold! I have something similar as part of my business plan but definitely not as comprehensive as yours. Something for me to takeaway and learn from!
@jfsrevg Hi Jeff, simple or exponential for the 10ema? Curious. Thanks
@jfsrevg Another masterclass by Jeff! :)
@jfsrevg Thank you so much for this! Always have issues in which I gave back gains and unsure when I should start to cut my positions. For anyone who needs a process flow diagram!
@jfsrevg Been looking for something like this the past week. Everyone, & me, talking about holding longer but I still needed a way to smooth the equity curve. Understand now how selling some early helps with this. The 10ema close under and next day 5min opening range low is ⭐️. 👍📝
@jfsrevg Very grateful. My biggest problem is selling. It's the greed plus the lack of a detailed system (like a truly truly detailed one like yours). I have been building out, testing and practicing. Will study this to personalise. You're awesome!
@jfsrevg Thank you Bro... Hidden gem again lots of things need to review here.. Hopefully I can apply these things on my trade and see the fruit out of it...
@jfsrevg @samsamtrades we should consider using some of these ideas
@jfsrevg Hey Jeff, great system. I have a question, do you always use 1% risk worth of capital per trade and just manage risk or do you buy pilot positions first for your initial trades and increase position sizing on new buys as the market gets better?
@jfsrevg Jeff how will you manage the trade if on day 3 the price is below buying price but hasn't hit any stop level? Will you just close the trade completely as price is below buying price?
@jfsrev Hey Jeff, Just a dumb question. The R that you mention here or the risk you are taking is it the entry price - LOD?
@jfsrevg Jeff Thank you once again for sharing this This is the second time revisiting this. So much wisdom in it and still trying to digest bit by bit. Thank you for sharing your systematic approach. 🙏🏻
@jfsrevg Hi Jeff, if let say it exceeds 8x or even 10x ATR from 50 SMA, how will you adjust your stop loss then? Thanks as always🙏🏻
@jfsrevg Thanks, you share great trading information.
@jfsrevg Since I am successfully applying your system, I have one question for you: in those cases where 1/3 or even 2/3 of position are stopped out the first day, do you still apply the take 1/3 profits on 2R or on day 3?
@jfsrevg why am I learning new thing time after time even after following your posts very closely for like months? thank you as always!
@jfsrevg I would be curious to know how you would handle a situation similar to $AAOI today, imagining that you bought it in early November.Thank you
@jfsrevg is this what you mean by profit-to-risk strategy?
@jfsrevg Hi @jfsrevg Quick quesiton, One thing I am not clear and perhaps you can clarify. 1) If u had 2R in T0-2, will you take 1/3 intra day or EOD close or Next Day open? 2) If u had 2R in T 0-2, Do u still take 1/3 off on T3 and set the stop loss to BE or only if there was no 2R?