Have you ever set a stop loss or take profit and felt that price might go down more but then bounce back up again so you extend the stop loss? Or that you could make more profit so you extent the take profit more and ended up losing? This is not a problem for only people starting out as new traders but also a dilemma that even professionals sometimes face! I like to call it the SLTP Dilemma for obvious reasons.
Often times when I am trading, I tend to feel that I could make more profit so I’m tempted to extend the take profit, most times I don’t but I do sometimes. I don’t like that I do this because then it’d mean that I am not disciplined enough to stick to my own rules. Which is bad. I mean really really bad if you also it. Many traders do this! And statistically the keyword “Stop Loss” is more prominent than “Take Profit” and I guess this is a reason that 95% of traders lose their capital.
Why aren’t we disciplined to take our profits more when we make even just a little pips? Why do most traders fail to set take profits? I don’t get it. It’s either sheer stupidity or senseless greed! But other traders do set SLs and TPs but then they are faced with other problems to alter these thresholds which I understand but don’t support. Once TPs and SLs are set, it’s in your interest to leave those orders to get triggered. If you did your work well, in most cases your TP will kick and you’ll make some money.
Some people say setting stop losses and take profits is for beginners, I beg to differ. These are just tools put in place for traders to use, except that I use my stop losses a bit differently; to protect my profits made so far. I will write a more detailed article as to how I do this and how. I do also set take profits alongside the stop loss orders. But for those traders who have problems with WHEN and HOW to set SLs and TPs, why don’t you just look at trailing stop orders?
A trailing stop is a special type of trade order where the stop-loss price is not set at a single, absolute dollar amount, but instead is set at a certain percentage or a certain dollar amount below the market price. This way you won’t get confused whether to adjust your SLs or TPs, you just leave it and problem solved. Even with this there are complications all of which I plan to address in upcoming articles so stay tuned and subscribe to my mailing list up the pages to get notified of future goodies.