In trading, there is a popular saying: "The one who buys is an apprentice, the one who sells is the master." In fact, in trading, setting a profit target (taking profit) is more challenging than judging the direction of the market.

So, what exactly makes taking profit difficult?

The first reason is psychological. Many people want to find the perfect profit-taking point. When they close a profitable position, and the market continues to move, they feel regretful about their exit point, and the profit they just made no longer seems sweet. They feel that their method of taking profit is flawed.

The second reason is technical. The trading system lacks a clear standard for taking profit, and each time it is based on feelings, which leads to more losses than gains in the long run. This also results in a constant state of anxiety and worry, making the effectiveness of taking profit increasingly poor.

To do a good job of taking profit, we must address these two issues.

First, we need to change our perfectionism. Nothing in this world is perfect; imperfection is the norm. In trading, no one can always buy at the lowest point and sell at the highest point; we are all mortals.

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We must have a fixed, clear, and complete standard for taking profit. This standard should be integrated with the trading system's trend confirmation, entry point, and stop-loss, and should be verified through backtesting to be effective in the long term before being applied in actual trading.

This is the profit-taking plan we should pursue. Next, I will share three methods of taking profit in practical trading.

The first method: Fixed profit-to-loss ratio.

This method uses the stop-loss space as the base and sets a multiple of the fixed stop-loss space as the profit-taking point.For example, when our stop loss is set at 50 pips:

A 1:1 risk-reward ratio means a stop loss of 50 pips and a take profit of 50 pips.

A 2:1 risk-reward ratio means a stop loss of 50 pips and a take profit of 100 pips.

A 3:1 risk-reward ratio means a stop loss of 50 pips and a take profit of 150 pips.

And so on.

After a double bottom breakout, enter the market with a stop loss set at the previous low point, a stop loss space of 160 pips, a 1:1 risk-reward ratio, and a take profit of 160 pips.

The advantage of this method is its simplicity; it only requires setting based on multiples of the stop loss space, and once the stop loss is determined, the take profit can also be set. In a consolidating and swing market, it allows for timely take profit, which can reduce the profit drawdown from market retracements.

However, this method also has its drawbacks. In a trending market, it may lead to premature take profit, missing out on the large profit space of the trend.

Therefore, this fixed profit method is suitable for consolidating and swing markets, but not for trending markets. Next, I will discuss a strategy that is suitable for trending markets.The second type: Trailing Stop with the trend.

This type of stop-loss is dynamic, referring to the trader following the changes in trend indicators and holding the position as long as the trend indicator does not confirm a reversal. Once the trend indicator confirms a reversal, the position is closed for profit-taking.

For example, using a moving average as a technical indicator for trailing stop with the trend, after entering the market, as long as the price remains above the moving average, the position is held. The position is closed when the price breaks through the moving average and confirms a reversal.

After a double top breakout, enter the market and hold the position as long as the price is below the moving average, and close the position for profit-taking when the price rises above the moving average.

The advantage of this method is that in a trending market, it allows for capturing a large profit space. The disadvantage is that each time the position is closed for profit-taking, there is a need for a confirmation of the reverse direction, which results in some profit giving back. Additionally, major trending markets are relatively rare, so the success rate of trailing stop with the trend may be lower.

In practice, there are many technical indicators for closing positions with the trend, such as turning points of market retracements, channel lines, trend lines, and so on.

The third type: Partial profit-taking.

During the holding process, according to specific criteria, when the market reaches the standard, start to reduce the position in batches to lock in profits, and continue to hold the remaining orders. This approach is a compromise between the two aforementioned profit-taking methods.

For example, when the position reaches a 1:1 or 2:1 ratio, reduce the position in batches to lock in profits. After locking in profits, the remaining orders follow the trend to exit, aiming to capture the large space of the trending market.After a double bottom breaks, enter the market, reduce the position at a profit-loss ratio of 1:1, and hold the remaining orders following the moving average until the price reverses and breaks through the moving average to close the position.

The advantage of this approach is that after reducing the position, a portion of the profit is locked in, which reduces the psychological pressure on us traders. Moreover, even if the market retraces and does not form a significant trend, we won't end up with nothing because we have locked in profits.

Of course, there are also disadvantages to this method. After closing the position early, the position size is reduced, and if a significant trend emerges later, the profits will also decrease.

Finally, let me mention that the three profit-taking logics mentioned above each have their strengths and are suitable for different market conditions, but none is absolutely perfect and can adapt to all market conditions, so you need to be aware of this.

In addition, these three profit-taking methods need to be combined with your own trading system. Choose the method that best fits the trading system and yields higher profits. Be sure to review past trades, conduct more tests, and consider the feasibility before entering actual trading with a clear answer.