In Trade Profit Management for a 1st HVF in a new trend .
The Trade Gradient Bands, excess profit take tool.
In the absence of a regimented unemotional process to manage your remaining open position after closing 60% at Target, you will get out on pain, whilst staying in on greed. The Trade Gradient Bands are an outstanding tool to ensure what is already a good situation is not spoiled in anyway by a lack of process to contain the emotional urges.
There needs to be a basis by which a trader can ‘milk’ the extended move, often common with first HVF’s in new trends. This over performance to initial planned RRR compensates for the additional risk of making the call on a short period of new trend for the timeframe under review.
The logic defining the bands, is that the ‘Infield area’ price action provides us with information on the momentum of the break. This means we have a clue on the trades force in reaching Target. We use a simple process to provide us with two lines that provide an approximated gradient for the trade at its best and slowest progress moments, any additional progress in the required direction within the bands area, whilst not retracing through our original target, see’s the trade as ‘Compliant’ and left open. A breach of the upper band suggests original momentum is now dissipating and that on offer should be taken quickly before, a progress decay stage moves into full swing with pullbacks against the set ups original direction.
A breach of the lower band represents an overperformance on our ‘excess profit management’ process and also see’s the trade closed. Why?
We were making more money even faster than before? Experience has shown anything accelerating at an excessive level beyond that already attained is at an utter extreme point of market reaction, bounces regularly occur, ‘punishing’ over performance with closing the trade often secures excellent profits and timing when retrospectively reviewed, nothing moves in straight lines for very long and holding the other side of the trade when
the ‘herd are stampeding’ whilst difficult to do, often proves exceedingly prudent after.
Deere chart below, a US Listed Stock. On a 30 Min Inverted HVF
The line of efficiency is usually superior by its gradient angle to the Trade Gradient Bands at it median line (The one best splitting the two limits aggregate performance, but they provide a degree of tolerance around the Line of Efficiency (LoE - attained from entry to partial close at the traditional HVF target).
These bands become live, post target attainment; along with the target level itself. Meaning any close through the Target level (already taken for 60%+) or the lower or upper gradient bands requires an immediate close of the residual position (40% maximum). Done on your pattern timeframe for candle closes.
This in trade management technique, can only be utilized by traders who have reasonable access to monitor the position. For those that cant monitor the market, follow the rules set below for the ‘whilst away ‘ situation described below. Don’t Trail Stops into the Trade Gradient Band area! What we do, do, is we move your Stop Loss pending order to the Target level already previously attained on the bulk of the position (Now a Profit Lock in).
For the take profit, we face a dilemma, as we do not have a horizontal level for which a fixed level may be selected.
If you need to be someplace else, leave your loss stop at the original Target level and place your new Take Profit on the Lower Trade Gradient Band, that which is directly below the current candle timeframe. In other words were it to capitulate in a straight line down vertically you would be closed on the band, this along with the profit lock in at the original Target ‘Collars ‘ the trade whilst you are busy. When you return, if neither have been hit but you have a close outside either the lower or upper gradient bands close the trade at market.
