By Omar Eltoukhy: Back when we were doing Operation Goldrush, I wrote an article that discussed how to aim for take  profits and I have decided to share that again here today in case newer members never saw it or people that didn’t follow along back then didn’t see it.

I think it’s a good way to build upon the foundations of a system that we have discussed so far.

After all, it’s not just about using those tools for entries, but wisely calculating potential r/r as well as seeking out nice places to work on take profits.  Enjoy!!!

Take Profits:

The most difficult aspect I have found in trading gold is not the entry, the stop loss, or when to trade.  Indeed, each breakout in gold may look similar at the start, but where they go next can vary.  Having a proper idea of what to set as the take profit is difficult because we want to capture as much of the move as we can, in a market where each move is likely to be a different size.  Some breakouts will go for hundreds of pips and we don’t want to miss that ride since it happens a few times a month usually, but we also see a lot of moves that carry around 100 pips past entry before reversing, and we want to maximize those moves as well.  Below are a few different approaches that I have used to determine take profit.  I don’t see one as hugely advantageous over the others which is why I leave it in your hands to make the final decision.  I have used them all with about the same success each.

• Based On Daily Range:  Take the 30 day average range for gold, subtract the move from the point of the breakout, and viola, there’s your target pips.  The upside is that you will capture this target more often than some of the others, but the downside is that you will miss the really big moves that happen occasionally.  Want to expand a little?  Multiply the 30-day range by 1.5 or 1.618 for a Fibonacci based extension.
• Mechanical R/R Technique:  Simply multiply your stop loss by a number higher than 1.  The smaller your stop, the easier it will be to capture a higher multiplier.  Don’t over-do this though.  Gold can give you a level of accuracy unmatched in my opinion compared to other markets.  Since we know that we will be right significantly higher than 50%, even a multiplier of 1 makes profitable trading.  Combine 80-90% accuracy of entry with 2X your stop and you can see quickly how powerful gold trading can be!
• Trail By Candle:  Simply trail by each hourly candle and don’t use a take profit.  You can also trail by 4-hour candles if you want to try to grab bigger moves.  Keep in mind you will need to keep a 5-15 pip “buffer” from each candle to allow for volatility.
• Target Fibs and S/R:  Another way is to use the next major fib level as a take profit or cluster of S/R lines.  Major trendlines work well for this purpose as well.  Just keep in mind that this method will lead to you being wrong OFTEN, as gold seems to ALWAYS stop at one of these levels, but it is extremely difficult to tell WHICH one it will be.
• Momentum Weakness:  Often, when gold has extended it move and is ready to come back, it will show signs such as sideways movement for extended time period, or a reversal candle.  This is a good time to shut down the trade as the reversals can be swift and very large.  Don’t be frustrated by watching your trade zoom into profit, only to come back following a reversal signal on the hourly timeframe.

Whatever method you choose, just remember the real goal is to win more than 50% of the time and have our gains be bigger than what we risked…..THAT’S ALL.  Don’t try to be a hero and grab the whole move, every time, because you will find yourself making bad decisions and potentially on the wrong side of a reversal.  Take good entries, get some gains, and then go about your day.  A few times a month, you will likely see a really big move, so ensuring you have a consistent approach will allow you to enjoy the bigger moves, while still racking up good, consistent profits on smaller moves.

If you would like to see more articles about trading gold: Gold Trading Articles

regards

Omar Eltoukhy