Fear should not limit your profits

It’s common for traders to feel emboldened by a profit, leading them to increase their positions and embrace greater risk. They believe they have the leeway to do so, effectively setting a higher Risk Reward Ratio (RRR) and waiting for larger profits than they would typically expect. However, in our series on successful traders today, we’re discussing an opposite scenario where a trader, in an effort to safeguard profits, closed trades with smaller gains than were possible.

It’s typical for a trader, having made a satisfactory profit, to consider taking on riskier trades or to set a higher RRR, thus waiting for a larger profit than usual. This means they don’t feel pressured to close trades with any profit at all costs but are willing to stay in trades longer, potentially leading to greater profits. Essentially, their existing profits give them the confidence to aim for even better results without the stress.

However, the trader we’re examining today acted in opposition to this pattern towards the end of his trading period. Despite a minor critique we’ll address at the end of the article, this trader managed to maintain profitability from start to finish, with a balance curve that most would envy, including a high consistency score.

Thanks to his conservative approach and reliable results, the trader had no issues with loss limits, never coming close to them. A profit of over $41,000 is indeed impressive, representing a growth of just over 20% from an account size of $200,000. The average RRR is commendable, and with a 50% win rate, it should ensure long-term profitability.

The trader was active for eleven trading days, executing 18 trades with a total size of 90 lots, averaging to 5 lots per position, which was the actual size of all his positions.

Usually, the trader opened only one trade per day, but when opportunities arose, he would open two or three positions, but never simultaneously. He is a quintessential conservative intraday trader who avoids holding positions overnight. In all his trades, he set a Stop Loss and in most cases, he also set a Take Profit, which is commendable.

The results for Buy and Sell positions are rarely balanced, and as you can see, he typically opened the first position early in the morning, which was also reflected in the overall results. The only instrument the trader dealt with was gold, which has long been a popular choice.

We’ll also examine the most profitable trades, both of which were successful in close succession, within two days, providing a significant psychological boost for any trader. In both cases, he likely capitalized on the gold price moving sideways within a specific range or a slightly declining channel, allowing him to enter trades around the limits of support and resistance.

In the first instance, he made a slightly risky entry after the support level broke, with the price rebounding to a long position. He set a stop loss below the recent low and aimed for a take profit with an RRR of 7:1. After ten hours of trading, the price reached the take profit level, almost perfectly coinciding with the price reversal. This trade resulted in a substantial profit of over $14,000, making it a very successful trade.

The very next day, the trader opened a short position in the morning after a bounce from resistance. During the trade, he likely moved the SL to a lower level, but the trade again ended at TP with an RRR around 5:1. Exiting at TP, the profit was “only” slightly above $10,000, but it was still a great trade, deserving of congratulations.

Interestingly, at the end of the trading period, when the trader had “made his money,” he became perhaps a little too cautious. This is not a criticism, as maintaining profits should be a primary goal for consistently profitable traders, but in this case, the concerns were a bit overblown. Even the balance curve shows that the gains from successful trades are not as significant as they were at the beginning, and you can see in the charts below why we allowed ourselves to be critical.

In the case of the second to last trade, our criticism is a bit harsh because the trader realized a profit where he set his Take Profit. So there is nothing to blame him for, the mentioned TP was not even set explicitly wrong, as it was placed above the last low, but after such results, perhaps the trader could have afforded a “braver” exit from the market, as he was already entering the market against the trend. Rather, we could criticize the placement of the SL, which probably should have been above the local high. Overall, however, we can evaluate the trade as good, the RRR was around 3.6:1.

The last trade can take a bit more criticism because it is a wasted opportunity. The trader entered quite risky half an hour after the US inflation, which significantly swung prices across the whole spectrum of instruments, including gold. If this had been an entry at the resistance level, as indicated on the chart, it would have been a potentially good, though still risky, entry point. The original SL was probably higher, the trader then moved it to a new lower high to limit losses, which is fine.

The problem lies more with the exit from the market. The trader hit the price drop after a rapid rise caused by surprising inflation and set the TP at RRR around 7.5. So far, so good. He didn’t close the first swing to the downside because he didn’t reach the TP, which is also fine. But he eventually closed the trade manually, at a time when the price started to fall again, which is really a pity. So the total profit from the trade was much less than it could have been in the end. At the same time, maybe it was enough to just move the SL above the new local high again, or to Break Even, and wait for further developments. In the end, however, even a small profit is better than a loss, so let’s not overdo the criticism.