An unexpected problem that a trader faces is profit fixation. How to do it correctly, how not to sell too cheaply and remain satisfied with the deal, how to stop biting your nails, watching the price fly to the moon, immediately after your fixation, how to eliminate cases when your deal was profitable for a long time, but in a few hours it went through your stop loss, turning potential profit into a direct loss, we will analyze below.
Profit fixation occurs the same way, regardless of whether it's a spot or futures transaction. For a successful fixation of the trade, I highlighted the following points:
Determining the target.
Partial fixation.
Moving the stop-loss to break-even (BE).
Partial position fixation for potential growth.
Determining the target - in any trade, you must define your goals, at least approximately, in case of expecting a new price peak, referred to as All Time High (ATH). The target at which you believe your trade is complete, where you fix the main part of your position.
Partial fixation - fixing 20-50% of a profitable position, this decision is relevant if you start to observe dubious price behavior in a profitable trade that you did not expect. For example: price sideways movement at unexpected levels from which the reaction may not be in our favor. Partial fixation allows us to reduce risks and realize part of the profit.
Moving the stop-loss to BE - this is moving the exit from the position to the entry point, reducing risk to zero, works great in combination with partial fixation, however, this should be done with certain experience. There is always the possibility of a price drop to BE, and then an exit to early targets, but this decision is made to exclude the option of "losing money."
Partial position fixation - on promising positions that I close with a huge sense of greed, I prefer to leave 5-10% of the starting position. In case of a continued movement, I will be calm, I will receive part of this run anyway; in case of a stop, I will incur small losses, which are significantly offset by profit.
And now an example:
My short trade on $OM
Partial fixation on strange price behavior. Specifically in this case, we have already started to cover the imbalance, I took off part of it as I saw a strong upward reaction.
Moving the stop to BE. I believe that the goal is almost achieved, the price exit to break-even will still leave me with a profit of 1R (what this is, I wrote in the previous article).
The instrument itself is wildly overheated. Presumably, I plan to leave 10% of the position after the goal is achieved, awaiting a "deflation," but much will be decided at the moment of achieving the goal. I do not expect to see low values, however, I will leave part of the position, one could say, as a dream.
Proper profit fixation is as important as competent loss management; these are two sides of the same coin. Personally, I use the tools listed above; whether you choose my method or find your own solution is up to you, my task is to tell and offer.
