A lot of commodity traders frequently enter into the trap of not being totally sure when to pick out gains on their commodity trades. Generally they take gains too speedily and other times they hold on for a big movement and their quick gain becomes into a loss. Knowing when to move out of a trade can often be quite difficult, but there are some simple steps to pick out that will help ease this trouble.
The 1st matter that all traders must see is that you will never get the top and bottom of every market on every trade. In point of fact, you wont still get close. There is no such matter as perfection in trading. The perfection that a trader requires to consider is applying the principles of a trading system to the letter and keeping discipline.
A trader must think of trading more as a game of figures and possibly not trying to enforce system of logic on the markets. The markets will do no matter what they are going to do and nonentity can nail 100 percent of the about time what they will do. Generally a technical or fundamental frame up in a market will suggest that the market will make a large movement. Generally it will and sometimes it wont. Basically because of this, a trader has to be uniform on when to pick out gains.
For instance, say that you most of the time buy a commodity at trendline financial support on the daily charts. You might risk $ 250 per contract on each trade and you strive for $ 500 gain. After that trading for a time period, you realise the markets will sometimes move far away from $ 500 gain objective and you leave lots of money negotiable. Other times, the market moves up $ 300 and reverses. You finally get stopped out at breakeven or you continue to hold and finally take a loss on the trade.
After that a while, it is simple for a trader to get mixed up and disappointed. After that a couple trades in a row where the market goes well past the $ 500 gain objective, the trader decides she will hold on for a $ 1000 gain on the next trade. The markets will frequently mess with your head during the time you decide to do this. Sure enough, the market makes a $ 500 move in your way and so reverses. You end up getting out at breakeven, as you didnt want to handle your stop up too tight.
This could happen over and over again. The more than times you change your gain objectives, the bad things will become. It is best to stick with the same gain scheme. If you have a high ease that you can be successful taking $ 500 gains and $ 250 losses, then stick to it. Dont worry about a market making a $ 2000 movement and missing out on gains. That will only drive you nuts. There will always be another trade coming in the future. If you have a profit and loss scheme that works, dont mess with it.
There is one pinch that I commend traders to do. You can assess the average daily reach over a period of time of 10 or 20 days and correct you profit end goal consequently. In time of high unpredictability, you might want to have an objective of $ 700. In periods of low volatility, you might want to lower the target to $ 350. I wouldnt make changes too frequently, but this gives you some ideas for tweaking your formula.
It is important for a trader to stay In the Zone so to speak. This means focus on taking your little slice of gains out of the market. Dont get greedy or egotistical and think you have to get every last penny of every movement. That type of thought is what gets traders to get mixed up and second-guess their trading. It clutters up their ideas and finally gets them to generate losses.