Intermediate Trading Strategy - Part 3In the previous post we discussed risk:reward, profit taking and trailing stop losses. If you have not read part 1 and part 2 then you are highly recommended to start there.
Taking Profit
Always taking partial profits, never making decisions for the full position. This is true when entering and this is true when exiting. It minimizes anxiety and emotional decision making.
In Trending Markets: Stop loss is trailed once new highs/lows are established. If long then move it up to be slightly under the recent low and if short move it slightly above the most recent high. This can generally be illustrated with Bill Williams Fractals on the weekly and daily charts. Full profit can be taken on the third test of a trendline.
In Parabolic Markets: I like to gamble on house money, it makes me feel much more comfortable about the draw downs. Here is an example for how to take profits in a parabolic market: If +100% then take 10%-20% off the table. If +100% again then take another 15%-25% off the table. Keep doing this as long as price is making all time highs.
Take full profit if phase 4 or phase 3 of hyperwave is violated
If weekly and daily RSI (with 30 setting) are > 80 then take full profit. If Welles Wilder’s ADX is > 50 on the weekly and/or > 60 on the daily then time to take full profit.
For Bitcoin' watch for NVT to reach overbought zones and consider how this metric will be affected by Lightning Network and batching transactions.
If Trading a Pattern: A chart pattern will indicate a profit target. If your reason for entering the trade was the chart pattern then do not get greedy with the profit target! Relying on a trailing stop will often cause a trader to miss out on a large part of the profit when trading a pattern.
Be very specific about what you are investing in long term/hodling and what you are using to trade.
If investing/hodling then put into cold storage and don’t do anything for a minimum of 10 years.
In the final post we will delve into the best indicators and provide guidelines for when they are most effective.
