Setting Take Profit for sell transactions

The use of safety orders is an integral part of trading.

This allows the trading participant to accurately implement the trading plan. In the descriptions of many trading strategies, the authors recommend setting Stop Loss and Take Profit at important local levels.

It is very important to find the right level that matches the current market situation.

Therefore, to correctly determine them, various analytical tools are used:

• Bill Williams fractals;
• Fibonacci ;
• cluster graphs in combination with volume delta.

The latter tool is quite complex and is only available on paid analytics platforms. The developers of MetaTrader terminals do not provide cluster charts.

Key features of asset value formation

In fact, there is an unspoken pattern in the pricing of financial instruments, confirmed by statistical data.

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If we take into account the key principles of forming the value of an asset, it becomes obvious that placing safety orders at local levels, in particular take profit for sell transactions, is not entirely justified.

To understand the features of correctly placing orders to record the result of a transaction, it is important to familiarize yourself with the features of pricing in general:

1. The price chart is always built in waves. Impulses in the direction of the current trend are replaced by corrections and periods of consolidation ( flat).
2. If the price overcomes a local level, it does not always indicate a trend reversal.
3. The decline in the value of an asset in most cases is more rapid than its growth.

When entering the market correctly to sell, most traders seek to lock in profits when the price reaches the nearest local level.

As a result, the expected income is either less than or equal to the potential loss. At opening sell transactions It is recommended to set take profit below the local level by 7-15 points.

The exact value of the order depends on market sentiment and other factors that caused the asset’s value to decline. To understand the feasibility of such actions, you should pay attention to several examples:


In this segment of the chart, the upward trend, under the influence of the publication of macroeconomic data, gave way to a short-term correction.

It is worth noting that the local price level was overcome by the chart.

In this case, setting the take profit 15 points lower than usual would significantly increase the profit from the transaction. This is not an accident, but a pattern that works in 80% of cases.
 
To verify this, it is enough to pay attention to a couple more examples: In each case, with a downward trend, the price drops below the local level.


Important!

Today, fundamental factors are not the main driving force of the market. Trading volumes play a key role in the pricing of financial instruments. Therefore, if the trend changed after the publication of significant news, then most likely this is only a short-term correction. This assumption is confirmed by statistics.

Where should you set take profit for sell transactions?

Take profit for sell transactions is recommended to be set on average 10 points below the local level.

If making such changes to your usual trading tactics is exciting, then when the price reaches the usual value, you can close 50% of the order or simply move the stop loss to a distance of 7-10 points from the current price.

Important! Putting these recommendations into practice will increase your potential monthly profit by 30-70 points, depending on your trading style.

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