The Simplest and Most Efficient Way to Book Maximum Trade Profits

Apurva Sheth
I received the following email from a Swing Trader subscriber:

While following your instruction, we have booked a profit of 14.29% on hitting a chosen trailing stoploss of 80, but tell me a method to book maximum profit, which was 21% around 10.30 AM today. I feel we have lost quite a bit, though we have booked something!

He wrote this immediately after we closed a trade in Lyka Labs a few days back. I had recommended a buy in the stock with an upper limit price of 70 after market hours on 3 March 2016. It went live at a rate of 70 on 4 March. My initial target and stoploss for this trade were 80 and 65 respectively.

Our Trade in Lyka Labs

On 4 March, the stock ended the session up almost 10%. In my End of Day update, I revised our target up to 84 and stoploss up to 75. On 8 March, it was up by another 9%, and I further revised our target and stoploss up to 90 and 80 respectively.

The stock stayed sideways for the next two days. On 11 March, it hit an intraday high of 85.5. But after that, it triggered our trailing stoploss of 80 during the day. We were out of this trade within a week with a 14.29% profit.

It was in this context that the subscriber wrote. He was disappointed we couldn't book out at the 85.5 high and wanted to know a method that would help him book maximum profit.

I'm sure you can sympathise and would love to learn about such a method.

But is there a foolproof way to find the exact tops and bottoms of the security you're trading?

Absolutely not.

There is no way in this world one can know in advance exactly where a security will reverse.

Analysts and media commentators would like to fool retail investors into believing they knew all along what was going to happen. But the fact is that no one ever knows for sure. Every market participant is making his own calculated guess.

Financial markets are about probabilities, not certainties.

But don't just blame the analysts and the media for making you believe it's possible to pick tops and bottoms. Retail traders too - in their greed - delude themselves into believing they can pick tops and bottoms precisely.

Now, if nobody knows for sure where a stock or index will reverse, how can a retail trader maximise his profits?

Simple: Use trailing stoplosses.

Take Lyka Labs as an example. When I picked this stock, our initial target was 80. When I saw potential for the stock to move much higher than I'd initially thought, I revised both our target and stoploss higher.

I always do that when I see scope for further upside. I revise our stoploss up, but I also move the target up along with it. By raising the stoploss, I ensure that we leave enough room for the stock to make its move and simultaneously also protect profits in case the tide turns the other way.

By raising the target higher and letting the stock run longer in our favour, we give ourselves the opportunity to maximise profits.

This is one of the simplest and most efficient ways to maximise profits.

By trailing our stoploss and target higher, we let the market decide what it wants to offer us rather than deciding what we want from the markets.

How do you maximise your trading profits? Share your views in the Club or share your comments here.

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1 Responses to "The Simplest and Most Efficient Way to Book Maximum Trade Profits"
26 Mar, 2016
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