Where to take profit
The target goes where the market can actually fill you: at the opposite cluster of orders.
Where to take profit — what it is?
The target is set not in abstract points and not by the profit you would like, but by the map: the nearest pool of liquidity, the opposite boundary of the range, an opposing zone.
The logic is simple. Price moves to where there is something to fill the volume with. So the likely stopping point is where that liquidity runs out.
The same reasoning answers whether the trade is worth taking: if the nearest target is less than two stop distances away, there is no trade.
Where to take profit — how it is built?
The order is this: first the stop-loss from the markup, then the nearest target by liquidity, then divide one by the other. The ratio should be no less than 1:2, better 1:3 — then the system stays profitable even with a modest share of winning trades.
Where to take profit — common mistakes
Setting the target at a round profit figure.
Moving the take-profit further away when price approaches it.
Setting the target beyond a large pool of liquidity instead of in front of it.
Taking trades with an R:R below 1:2 while counting on a high win rate.
Related to
Glossary
- liquidity
- a cluster of pending orders and stops in a particular zone. The fuel for large capital to move.
- range
- movement inside a horizontal corridor with no clear direction.
- volume
- the number of trades or contracts in a period.
- point
- the minimum step of a quote, usually ten times smaller than a pip.
- stop-loss
- an exit level set in advance for a losing trade.
- take-profit
- a level set in advance for locking in profit.