Hey trader,
Locking in profits at the right time might be the toughest call in trading.
Take them too early, and you leave money on the table. Wait too long, and a winner can turn against you before you act.
I don’t try to guess the perfect exit. I let my stop do that work.
As a trade moves my way, I move my stop up in planned steps. Each step shrinks what I can lose, until the trade can only pay me.
That gives you a system for locking in profits instead of a gut call.
The steps come from the chart. They work the same on one contract or 100.
On Tuesday, I got long micro crude at 93.26 with a target of 94.95. Early on, I had about $72 at risk.
Crude never reached my target. Before I left the futures room, my stop had locked in about $68 of profit.
That one trade carried my whole morning.
Here are my three steps, plus every stop move on Tuesday’s crude trade.
Why Locking In Profits Feels Like A Guess
A profit target marks where you hope a trade goes. Getting there takes decisions the target can’t make for you.
Price rarely travels in a straight line.
It pushes, pauses and pulls back. Every pullback tempts you to grab what you have.
Grab it too soon, and the move keeps going without you. Hold out for the full target, and one reversal can hand back the whole gain.
I handle locking in profits with a trailing stop that moves up with the trade. I don’t move it on a feeling, though.
Every stop move needs a reason I can point to on the chart.
I use three of them, and each one cuts my risk. Eventually my stop sits above my entry and starts locking in profits.
My Three Steps For Locking In Profits
Step 1: Count three closed candles.
Price has to print three straight candles with higher highs, lows and closes. Then I move my stop to the low three candles back.
Only closed candles count. A candle that’s still forming can change before it finishes.
Step 2: Tighten when a divergence warns.
A bearish divergence means price makes a new high while my momentum indicator doesn’t.
It tells me the buyers are losing their push. When I see one, I set my stop tighter than my normal trailing level.
My normal level comes from Parabolic SAR, which prints a dot under each candle. As price climbs, the dots climb with it.
Step 3: Give the stop a few cents of room.
Micro contracts can trade with wider spreads, the gap between the bid and the ask.
I set my stop a couple of pennies below the dot. One wide quote shouldn’t knock me out of a good trade.
There’s a balance here. I told the room to wait for the higher close before tightening too much.
Tuesday’s Crude Trade, Step By Step
On Tuesday, crude broke out of a channel and above my beacon at 93.17. Beacons are levels I map at set percentages of each market’s range.
I got long micro crude at 93.26. My target was 94.95, the 50% beacon.
Here’s how the stop climbed, locking in profits along the way:
- Three-candle steps. Moving the stop from 92.90 to 93.08 cut my risk from $72 to $36.
- Divergence warning. A bearish divergence put my stop at 93.27, above the closed dot at 93.19. That took my risk off.
- Room for the spread. With the dot at 93.39, I used 93.36 and locked in $20.
- Higher close, higher stop. In the futures room, a higher close let me move the stop to 93.60. That locked in about $66 to $68.
Crude never reached 94.95. My trailing stop closed the trade near 94, well above my entry.
That runner carried the morning.
I cut a gold trade early for about a 4-point loss. My MES and XSP trades finished small.
All the trades I called on Tuesday ended up $140.
Put The Steps On Your Next Trade
You can run this on your next winning trade with three habits:
- Name the reason before you move the stop. Closed candles, a divergence or a fresh dot all qualify as reasons.
- Track your risk in dollars after every move. Watch it shrink to zero, then start locking in profits.
- Leave a little room on micros. A couple of cents past the dot protects you from one wide quote.
Locking in profits starts with a stop that moves for a reason.
That’s my line, and it doesn’t have to be yours.
On Tuesday, I typed every one of those stop moves into the room’s chat. I kept typing them after I moved over to the futures room.
Inside the 10% Club, you hear how I’m locking in profits while the trade’s live. You know your risk in dollars at every step.
You also get the entry, the stop and the target before I take the trade. That way you can size it to your own account.
Move your stop for a reason, and keep locking in profits step by step.
Blake Young
Senior Market Strategist, TheoTRADE
