The Trade Entry Has Been Triggered - How To Secure Profits?

(MENAFN- ValueWalk)

Entry… triggered! The price rallies to the Moon, but you don't want to cash out“just yet” – am I right? So, let's see how to prevent hard landing.

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Q3 2021 hedge fund letters, conferences and more

The Children's investment Fund Management LLP is a London-based hedge fund firm better known by its acronym TCI. Founded by Sir Chris Hohn in 2003, the fund has a global mandate and supports the Children's Investment Fund Foundation (CIFF). Q3 2021 hedge fund letters, conferences and more The CIFF was established in 2002 by Hohn Read More

There are obviously several methods to assess risk and thus to manage it, depending on one's risk appetite or what is also more commonly known as risk profile. One method I use on swing (longer-term) trades is to manually lift my stop once – at least – 50% of the first target has been reached on a swing trade. I provide such trades on Sunshine Profits based on the projections I draw.

Let's take a practical case: in my last trade position on WTI crude oil provided on Nov-30 , the market found a floor around $66. Then after being pushed up by the bulls, it rebounded onto that support level ($65.70-66.21), and rallied up to $69.49. So, if we take our reference entry in the middle of the yellow band at $66, the market moved up exactly 70% of the total distance to the target 1.

At this point, to avoid giving profits away, an option would be to lift the stop to net breakeven ($66 + commissions/fees) so that the risk for that trade could get offset once 50% of the distance to the target 1 is passed. Following that, if, for example, the market pursues its rally further – let's say up to 60% – then the stop will be lifted to net breakeven + 10% of the distance to the target 1.

In our case the market rallied up to 70% of the distance to the target 1, so the stop should be lifted to net breakeven + 20% of the distance to the target 1.

From my experience, this may represent a good way to manually trail your stop. Of course, there are many different methods to do so, but I haven't heard of many investors or traders mentioning that one, therefore I wanted to present it here.

The following chart is the one I posted in my trade review published on Wednesday, the 1 st of December :

• 1. WTI Crude Oil (CLF22) Futures (January contract, daily chart from Dec-1)
• 2. WTI Crude Oil (CLF22) Futures (January contract, 4H chart from Dec-1)
• 3. WTI Crude Oil (CLF22) Futures (January contract, daily chart)
• 4. WTI Crude Oil (CLF22) Futures (January contract, 4H chart)

To better visualize the price action that occurred, we zoomed into the 4-hour chart:

As you can see, the level provided was optimum given its function to act as a floor for rebounding prices. Then, the market was up to 70% of the total distance to reach the target 1, and finally reverted back down to the stop level.

Now, this is today's chart:

Again, a zoom into the 4H chart lets us see more details of the price action that occurred:

In summary, using such a method of risk management to keep intermediate profits before the trade reverts strongly to the downside might be a good idea, particularly during high volatility periods. Are you interested in seeing this strategy in action? Make sure to check my Oil Trading Alerts !

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Thank you.

Sebastien Bischeri

Oil & Gas Trading Strategist

The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri's reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Updated on Dec 3, 2021, 10:58 am

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