My winning trades for the day came from a strong bullish move on Silver, which has been on an overall strong move up on the daily chart. I had been looking at opportunities to enter a long position after a pull back. The chart below represents the one hour price action of Silver along with my exact entry point for a continuation trade.
As per the screenshot I had drawn an upward support line along with a horizontal line that was to form the basis for a future potential breakout trade, should price action move outside of this ascending triangle. In regards to the trend line, it was apparent that this trend line was being respected as price was continuing to bounce off it.
On first glance of where my entry point was, it doesn't necessarily look like a strong entry point. However, see the zoomed in image below for clarity.
What I effectively saw was one bullish elephant bar, if combining the price action of the two bars together. As part of my trading rules I tend to only enter on an elephant bar, where there is volume behind that price action. I entered this trade and let it run.
The first image shows that the price action effectively ripped after a few candles to the upside putting my trade in profit. I had not, after this initial rip to the upside moved my stop loss. If I had moved my stop loss to break even I would actually have been stopped out of my trade, as it wicked down through my original entry point 2 hourly candles in a row. You can see in image 2 the highlighted 'subsequent pull back' a number of candles into the trade.
It is very tempting to move stop losses to break even when your trade is in profit. The market is and will always be very unpredictable. I have learned the hard way when it comes to being flushed out of trades due to being desperate to move my stop loss to break even, once in profit. This used to be to avoid the painful feelings of a losing trade after once being profitable. When I set my stop losses now, I set them on the basis that I am prepared for that loss. I only move my stop losses when/if I am sufficiently in profit.
The next difficult part of this trade was determining when to take profits. For this trade I was scaling out on the way up. My general rule with trades is that I don't have the right to take profits until my trade is at five times the amount I risked. At that point I am mandated to take as a minimum 20% of the profits.
I entered this 0.5 contracts trade at 2860.5 with a stop loss of 2842.5. My stop loss value and therefore my initial risk on this trade was £36.
I took profits as follows:
Tranche 1 - sell 0.15 (30%) of initial position at 2968 for a profit of £63
Tranche 2 - sell 0.10 (20%) of initial position at 3074 for a profit of £83
Tranche 3 - sell 0.10 (20%) of initial position at 3228 for a profit of £144
Tranche 4 - sell 0.15 (30%) of initial position at 3148 for a profit of £169
TOTAL PROFIT = £459
The total profit of £459 represts 12.7 times my initial risk amount of £36. The only reason the trade is this profitable is on account of letting the market do its thing and allowing the trade to run.
Every trader has their own rules on profit taking. Many exit their trades after a certain target such as two or three times their risk. My win rate is probably lower because I don't set specific targets only an initial mandatory take of profit at 5x my risk.
The reason I don't set profit targets is that I would find it painful to exit a trade early, particularly if it goes on to continue ripping in the direction of the entry I placed. For me there is less pain taking my stop loss than not capturing a big move.
Trade Clearly!
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