How/When do we take Profits ..scale out/take all ??
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Hi guys! Still don't understand this concept that everybody is presenting ( that are presenting/teaching) - ... they say...set your risk /reward to 1/2 1/3 1/5 ..whatever..1/X...and then when they are showing a model of entry/exit, they say ..take some profits at this level...take some more profits at this level..and so on...I have seen in many presentations...they set target at 1/2 ( risk 1 to make 2)..but at that level where 2 x risk is accomplished, they are taking some profits...then..is not 1/2... if you are risking 15 pips, and after 30 pips on profit you take half of the profit, and then market returns and take you out at breakeven... it means that you are 1/1 risk/reward ...how do you guys do it?...for example...I am learning and testing on a small live account... usually I risk 2%...so when I loose, I loose 2%...2% at my SL which is usually around 15-20 pips is about 50cents/pip ...when I win, because of scalling out... I make a lot less...for example this week...I am 138 pips in profit...and average volume/trade is about 10cent/pip...because I scale out..half after I double risked pips...and more later, but many times market returns and take me out close to breakeven...yesterday I made 48 pips with risking 17 at 0.05lots...after 20 pips, take half profit... and rest left and closed at 48 pips...but for the all run , on average, I made 30cent/pip....today...on CADJPY...opened at 0,05 lot about 18 pips SL... I was on profit about 12-15 pips...left a little bit and when I returned ..closed on SL... 50cent x 18pips lost.. :) ...how do you guys do it...I must do something wrong about management of money.... how do you calculate risk/reward ratio if take out profits on certain levels. ? because risk/reward 1/2 means that I risk 15 pips at 50 cents to make 30 pips at 50 cents..wright?
You seem to be talking about partial closures (and maybe even moving the stops by trailing after you take a partial closure).
Well, if that is the case, you calculate the risk/reward based on those partial closure levels (and possible trailing levels).
Here is an example with only partial closure but no trailing stops:
Let's say your stop loss is at 10 pips, and your first reward level is at 15 pips, where you close out half the volume, and your second level is at 20 pips, where you close the rest.
So at 15 you take half, and at 20 you take the other half. The reward will be 0.5 x 15 + 0.5 x 20 = 7.5 + 10 = 17.5
So the Reward:Risk ratio is 17.5:10. So Reward = 1.75 x Risk.
If you had taken the total volume out at the first level, then the Reward:Risk ratio would have been 15:10, or Reward = 1.5 x Risk.
EDIT: Please note that after the first level, your Risk drops by half too. So if you hit the first target, but not the second, then you will profit 7.5 and lose 5, with a total gain of 2.5.
So you have 3 possible outcomes:
- Loss of 10
- Gain of 2.5
- Gain of 17.5
What ever, the strategy, you need to look at the rules and calculate the values.
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