Right after my post yesterday in which I weighed the pro's and con's of using stop loss orders to protect winning trades against reversals - a strategy which frequently resulted in me keeping only pennies - the idea occurred to me to try scaling out of winning trades while also using the protective stop loss orders.
The idea is this: when a trade moves into profit and hits what appears to be resistance (I'm using "resistance" generically here, meaning a price point the currency pair in question temporarily halts against, be it a long or short trade), close half of the open position and then place a stop loss order at just above break-even. This way, even if the trade moves back to break-even after a brief snap in your favor, you've taken a portion of those quick profits off the table and have more to show for the trade than just pennies.
I went long eur/usd this morning when the 1 minute chart displayed a pattern I've gotten to know and gave this idea a whirl. I sold half of my open position when the trade hit resistance and moved my stop to just above break-even. The trade then got through the resistance point and continued moving up, so I moved the stop order up with it, locking in even more profits. Another resistance point appeared, but I hesitated a bit and did not sell another 50% of the remaining open position in time, which resulted in the stop order closing out the remaining position instead. Oh well, next time.
The final result: this trade put my NAV up another .6%, bringing my weekly total to a 2.7% increase over my starting NAV - I've hit my weekly goal again!
I like this technique. It's certainly not a "win big" strategy, but it does seem to strike a nice balance between forgoing stop orders and enduring big swings into the negative, or having stops kill winning trades before they have a chance to run.
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