Scaling out and Taking Profits


Screen Shot 2014-06-17 at 11.12.19

Video Transcription:

Hello, traders. Welcome to the Pro Trading Course and the third module Swing Trades: Follow global macro trends. And in this lesson, we are going to teach you how to scale out on your trades and take profits, because let’s face it. You can’t grow an account without taking profits. Now, we’re going to go back again to the example on crude oil, because you already know how to enter your trades, how to scale in on your trades. But now, I’m going to teach you how to take profits from your trades, all right? And I’m going to use the green horizontal line or the green dotted horizontal line as taking profit levels.

Now, the first thing you need to understand is that you will never know where the market is going to go, all right? You already know this. I just have to tell you again. This is not a game where you are going to guess the direction of the market. The name of the game is risk management, all right? So we are going to take high probability setups, and we are going to correctly manage our risk and manage our money. This is how we’re going to grow our account. Now, the first thing you need to understand is that…let me just get rid of this rectangle…is that you don’t know if this level is going to hold or is going to break. So what’s going to happen, all right? The first level where you are going to be taking profits is this one, okay?

Scaling out and Taking Profits

Make sure that you have a 1:1, at least, a 1:1, risk-to-reward ratio on your first take profit level, okay? Now, I’m talking swing trades right here now, remember. So you get in on at 49.08. You have your stop losses right here at 51.61, and you are going to take profit at 46.75, which means that we have 1:1 risk-to-reward ratio in our hands, all right? So the reason we are going to take profits on the first level is that we don’t know that if price is going to come all the way down here and then balance of this level and break this down structure, this blue down structure that we are in right now, okay?

So this is the first level, the first logical level where we are going to take profit. It really doesn’t matter if price breaks through this level or if it doesn’t. We’re already taking profit out of it, okay? And when we take profits from this low, we are going to move or stop to break even. Why? Because we don’t know if price is going to bounce off of it, all right? If price bounced off of it, okay, we don’t want to be in this trade anymore, and we are going to take half of our trade as a profit and the other one as breakeven. But if price breaks through the level, well, we are going to hold our trade until it hits our last target using all the trainings that I’ve shown you thus far.

Scaling out and Taking Profits1

Now, this is the first way of using or scaling out on your trade, okay? The second way or scaling out on your trade is not having a target, all right? And using the first part, all right, we are going to scale in, I’m sorry, to scale out right here at this level, okay, at the previous slope. Price breaks with it, and we are going to take, well, we are going to take one third of our trade right here. Then we are going to take one third right here. And when this happens, when we take the second third out, we are going to move our stops to above the previous level, all right? When price breaks with this level, we are going to hold our position, okay, until it hits the next logical target. And the next logical target is all the way down here. So by scaling out on our trades, we are giving our trade the chance to ride an even further trend, okay?

So to recapitulate, okay, we are in a trade. We take profits on the first level, all right, the level that we don’t know if it’s going to break. When we take profits, we move our stops to breakeven. Price breaks with this level, and, of course, we take one third of our position right here. When price breaks with this lever, we wait for price to hit our second target. When price hits our second target, we take out one third or the second third of our position. When we take the second third of our position out, we move our stop to the next logical level, all right? So if you notice, we are taking profit and trailing our stops at the same time, okay? The reason we are going to trail our stops right here is because we don’t know if this level is going to break, okay? And if this level doesn’t break in price, moves up, breaks with the blue down structure, we want to be taken out, okay, on a profit on the rest of our position.

Scaling out and Taking Profits2

But we do have one third of our position still riding and when we break to the down side, okay? And when we break with this level and start to move down, we are going to take this and move our stops down to the next logical level, which is this one right here. And why? Because if price doesn’t hit our last target, well, we want to be taken out of this trade on a profit, because the blue structure will no longer be in play. So this is how you can either take half of your position at the first structure and then ride it down to the overall target or take one third at the first structure, one third at the second structure, and let the rest ride for a even bigger target on your trades.

Comments are closed.