Home Forex Education Forex Daily Topic Taking Partial Profits: an Alternative if You are Too Defensive

Taking Partial Profits: an Alternative if You are Too Defensive

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In today’s article, we are going to demonstrate an example of the daily-H4 chart-combination price-action trading. The signal candle comes out as a strong bearish candle, which attributes have a lot to offer to the sellers. Let us find out how it ends.

This is a daily chart. The last candle comes out as a bearish engulfing candle. The daily-H4 combination traders are to flip over to the H4 chart for the price to consolidate and produce a bearish reversal candle to offer them a short entry below the consolidation level of support.

This is the H4 chart. The price consolidated earlier before producing that daily bearish reversal candle. Traders must wait for consolidation and a bearish candle from now. It produces two bearish candles consecutively. It may consolidate soon.

It produces one more bearish candle and starts having a correction instead of consolidation. It is less likely that the chart presents a bearish engulfing candle breaching the level of support. We shall never be certain, though, since it is the Forex market. Let us see what happens next.

Would you believe it? What a good-looking bearish engulfing candle that is! The sellers may trigger a short entry right after the candle closes by setting stop-loss above the level where it has a rejection. Such price action offers 1:1 risk-reward easily. Considering the signal candle, the price may go towards the South further and get more reward to the sellers.

The chart produces a bullish inside bar and heads towards the South again. The last candle comes out as a bearish Marubozu candle. The sellers must hold the trade to make a handful of pips.

The price heads towards the South for one more candle. However, it produces three consecutive bullish reversal candles. The last one comes out as a bullish pin bar. The price is still to cover a lot of space to get us 1:1 risk-reward. By looking at the price action for the last three candles, it seems that the price may have an upside correction before making the next bearish move. It may even change its trend as well. It is best to have a belief in our positions and hold it as long as we can. In other words, we shall remember the rule ‘set and forget.’ However, if the price produces too many reversal candles and strong reversal candle such as pinbar, truck rail, or engulfing candle, we may consider taking a partial profit.

In such cases, taking a partial profit comes handy. We may take out at least 50% profit and let the rest of it run. Even if the trend changes, we do not lose money. On the other hand, if it goes towards our desired direction, it gets us more profit.

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