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When to take profit. Any thoughts?

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dookie
Regular Contributor
Does anyone have some suggestions on a profit taking strategy in the following situation. A fairly long-term trade for most on this forum - a couple of weeks - short SBK. I'm trading on the assumption that SB is making that gargantuan H&S spoken about before. Now that could take some time to pan out - having just recently broken the neckline. Given the cost of SSFs (it seems to me that the first 1.3% or so of any day's move on the underlying, in your favour - goes to spread costs ie you lose until the favourable move exceeds that amount), do you just sit out the rollercoaster until the end of the H&S or is there any vaguely reliable way to harvest profits along the way and re-enter, so as, for example, to avoid the usually crippling effect of a return move to the neckline? I'm trying to eye RSI, MACD and ROM at the moment. Would love your thoughts. And for pure interest - what do the day traders consider a good/okay/k#k (and achievable) profit per trade, (percentage please - we know you take a million bucks or more in a scoop...) Are we talking .5% per day, 5% or 50%? Tank you!
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6 REPLIES 6
venice
Super Contributor
Use a stop to take profit as follows. Average true range over the last 10 days times 3 so if ATR= 10rand then put a stop at 30 rand above, that way you get away from the noise but will stop out if there is a true reversal.
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dookie
Regular Contributor
Thanks V. I didn't know that indicator and I'm def going to give it a trial run. Only thing is... I get 353.9 (cents, it seems) for the 10day ATR on ammibroker, with yesterday's close of 68.75. 3x353.9 ==> a stop (if I'm short...) of 68.75 + 10.61 = 79.36 = 15% move on the underlying. On a SSF with about 5x gearing that's .... yikes!...75% odd of the trade. I'm going to have to think of a way to control that - perhaps with a teeeny trade size or something. Seeing that you know about ATR... is there a book you want to recommend for TA... I have done the SB courses, but Yonatan definitely doesn't cover ATR. :-)
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Not applicable
If you are in very short term, you could also look at envelopes, kelter bands or other indicators of deviations from the mean. (bollinger bands won't work in this case, I don't think, because they are more useful for trading ranges). The principle is that once you touch the envelope or band, then the share is likely to start pulling back to the mean
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dookie
Regular Contributor
Dankie Skapie! I'm going to google all that and fiddle with the bands in my Ami (I can already see Keltner bands......)
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dookie
Regular Contributor
Ay... what do you know! I can see a couple of hectic bounces on the Keltner bands :-) Thx :-)
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Not applicable
3 times ATR is one heck of a big loss. 1.5 at most is what I use.
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