Trailing Stop vs Hard Take Profit

In trading, there are a lot of different debates… The debatess range from Scalping vs Swing Trading to Martingaling vs Anti-Martingaling to Automated Trading vs Manual Trading, ect.

Today, I want to discuss the logic of using a trailing stop to get out of trades vs trying to hit a  hard take profit.

In my opinion, this is a crucial question.. This is a question that could determine whether a trader is profitable or unprofitable.

With that said, let’s take a look at how to answer it.

There are a lot of things to take into consideration when pondering this, but obviously the most important thing to consider is which is going to be more profitable in the long run. Remember, if you want to build wealth over a long period of time, it is imperative that you choose a trade management style that is going to make more profit over multiple years. Another thing to keep in mind is that you can change your entry strategy according to market conditions, but use the same type of trade management strategy with all different kinds of entry rules.

I have two goals for this article.

My first goal is to get feedback. I want to know what our readers are doing in terms of trade management, why they are doing it, and if it is working. Getting feedback from hundreds of real, active traders is the best way I know of to learn more about Forex trading. So whether you are losing money every day, treading water, earning small profits, or a millionaire trader, I really, really want your feedback on this so that I can learn more and so that other readers can learn more. Please vote AND leave a comment with more in-depth information. I will appreciate it and so will many other traders.

My second goal is to illustrate what I believe about this matter. I want to explain my feelings about this topic and give you an idea of why I am in very strong support of one side.

Before watching the video on what I think, please vote on which you think is a better way to manage trades:


Thanks for voting! Please also leave a comment to share why you voted the way you did!

I am now going to share my personal opinion on this matter. This is, of course, just my opinion, but I hope I can shed some light on this topic and that perhaps it will be beneficial to you.

 

So that is where I am coming from. In my opinion, I just don’t see the logic in using a hard take profit. Knowing that any trade entry is going to produce so many different results, I think it only makes sense to take as much of what the market will give you as possible.

Again, please leave a comment and let me know what you think!

Talk soon,

Nathan

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Winners Edge Trading was founded in 2009 and is working to create the most current and useful Forex information and training available on the internet.

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  • Cayenne

    I don’t use a conventional trailing stop but rather I move stop to previous low/high, one new highs/lows are created. I believe this does work in the longer term as I am trading forex majors which have large daily movements. Set up an ATR (1) on a major pair on daily timeframe, and you will see some huge bars in the past 10 years. You cannot afford to miss these opportunities as they will bring large profits to the table with minimal risk.

  • Thanks, Nathan….Great topic!  I like to use a variation of the two options you mentioned…I use hard stops, and move stops to break-even once the market is a comfortable distance away. For profit, I like to hold and manually manage my trades by gauging price action at levels where I would consider for profit-taking. I do not like trailing stops because I believe it can often take you out of trades prematurely.

    This is my primary method of trade management as a longer term swing trader. As you suggested though whatever method one uses should be dependent on the overall market setup (Breakouts for instance is usually great for the use of trailing stops) and as such, traders should get creative in the way they manage their trades.