| There is a long-standing and interesting debate on | | | | targets make a lot of sense. |
| the subject of when to use profit targets and when | | | | Suppose you have identified a market condition in |
| to use trailing stops for successful trades. There are | | | | which no-notice explosive breakouts that often fail |
| passionate advocates on both sides of the debate | | | | are very likely. Suppose that your trading target is a |
| who believe that their answer is correct for all | | | | large-cap, very liquid exchange traded fund that has |
| trades, all styles and in all conditions. | | | | very regular performance statistics. Suppose further |
| My personal opinion is that the exit strategy you | | | | that the average false breakout of this index from a |
| employ must make sense for your personality, your | | | | congestion zone is a 1% move, and that 80% of the |
| trading style, your goals and objectives, and in the | | | | time the breakout will fail back to the middle of the |
| timeframe in which you are trading. | | | | previous congestion zone. |
| No matter what strategy you select, it's important | | | | In this scenario a trailing stop would most likely return |
| for you to conduct an analysis on a regular basis to | | | | too much profit to make this scenario worth trading. |
| determine if the exit strategy is in tune with the | | | | But if you could fine tune your entry conditions and |
| market type and trading style you are employing. It | | | | have a very tight initial capital preservation stop, you |
| is far more important to analyze your exits than it is | | | | might find that reliably harvesting most of the 1% |
| your entries, because it is through improvement of | | | | move intraday could return some very valuable |
| your exits you will make a far greater positive impact | | | | returns. The only downside to the hard profit target |
| on your bottom line. | | | | stop would be that any breakout that continues past |
| It is the general consensus in our trading mastermind | | | | that move would not be available to you. |
| that the shorter your time frame, the more likely you | | | | Rather than trying to design a complex set of exit |
| are to find that hard profit targets are appropriate. | | | | strategies that would catch both the false and the |
| Hard targets take you out of a position as soon as | | | | true breakouts, I believe you're better served by |
| that prices reached. | | | | having a separate system to trade the true |
| Conversely, the longer your average holding time the | | | | breakouts if you decide that is an opportunity and an |
| more likely you can afford to let the trend run and | | | | edge that you possess. |
| use a trailing stop designed to simply and easily | | | | The bottom line is: analysis of your exit strategy is a |
| harvest most of the trend. | | | | high payoff activity for the professional trader. |
| Here is an example of a strategy in which hard profit | | | | |