A lot of traders exit too soon, then watch the move go much further and leave a load of profit on the table. This episode is about avoiding that.
The goal is simple. Every time a trade goes your way, you want to capture as much of the move as you can.
Key takeaways
Set your take profit on market structure like support, resistance, supply and demand, not on a dollar value the market does not care about.
Once you set take profit on a real level, be patient and let price hit it instead of exiting too soon.
Take some profit off, like 0.25 of a lot, and let the rest run so you bank something and still capture the move.
Moving your stop to entry often gets hit and costs you the move, so a slightly tighter stop keeps loss small without giving it away.
You want a small loss, small profit, big profit or break even, but never a big loss.
Measure how much of the move you actually caught, so you can see when you are exiting too early and widen your take profit.
Set take profit on market structure, not dollars
Your take profit should not be based on a dollar value, because the market does not take that into consideration. It should be based on market structure.
That means key support and resistance, supply and demand, moving averages or price action itself. Use something to find a level that is significant, where price is likely to react.
Once you have set your take profit on that level, be patient and wait for price to reach it. When your analysis is correct and you have done the work, it usually goes all the way.
“The market does not care about your dollar value, it cares about significant levels.”
Partial exits and smarter stops
To help you stay patient, you can take partial exits. Say you have one lot and it moves your way. Remove 0.25 lots to bank some profit and let the rest run.
Many traders move their stop loss to entry to make it risk free. In practice price often comes back to that entry and stops you out, and then you miss the actual profit.
So I do not set my stop at entry. I make it a little tighter instead, which means a smaller loss if it hits. It is not risk free, but knowing the loss is small helps me hold the trade with more patience.
Only ever avoid the big loss
In trading you want one of four outcomes. A small loss, a small profit, a big profit or break even.
The one thing you avoid at all times is a big loss. That is the outcome that does real damage.
When you know your loss is small, you naturally hold trades longer, and psychology is a big part of trading. Help your psychology and you get much better results.
Gain capture, the metric I built
We already have metrics like average risk reward and win rate. Gain capture is one I came up with myself, and it measures how much of the move you actually captured.
Say you buy and set take profit 10 pips up, price moves exactly 10 pips and hits it. That is 100 percent gain capture. If you set take profit at 8 pips and price moves 10, you caught 80 percent.
Looking at my journal, I see a trade at 90 percent, one at 50 percent where I exited too early, some at 100 percent, and an average around 70 percent. If your gain capture is low, widen your take profit and exit a little later. For this you need the pair, an image of the setup, and how much of the move you caught.
When you are capturing more of every move, compare reliable prop firms to trade with on Propvator.