Taking Quick Profits Versus Boxing in Profits: "Bread and Butter" or "Bread Crumbs?" (Part 5)

11/14/2008 12:01 am EST


Timothy Morge

President, MarketGeometry.com

I cancel my prior stop profit order and move it higher, to 50 pips below the low of the just-closed bar at 1.4492. If price turns around at this point, I will be stopped out for a very nice profit of 332 pips. Once I move up my stop profit order, I check where price would intersect with the upper Median Line parallel when the next bar forms. That price is 1.4679, and so I move my limit sell order and profit target accordingly.

This part of trading is the hard part—doing the little things without making mistakes. But it’s the attention to detail and the logical movement of stop orders and profit orders that can maximize your profitability. It is fun to look at the newest multi-color, computer- generated lagging indicator in the magazines, but it is truly the work once you get in a trade—managing the trade correctly—that can make all the difference in the world—but it isn’t fun to look at, and most traders don’t really want to talk about it or read about it. New indicators are fun toys! Money management is…well, boring. But a good understanding of money management really drives your profits, in my opinion.


The next bar ran higher, taking me out of my long euro FX position at 1.4679, for a total net profit of 519 pips. Price did go higher, but that didn’t bother me in the least. I had a plan, I traded my plan, and now I was flat with a nice profit. The market would go where it wanted to go, but my planned ride was over. And it ended quite nicely, thank you.

As a mentor, how do I compare my style of trading this market with the style used by other traders, namely those using “Bread and Butter” style trading to approach these markets? Certainly, I made much more on my trade than any of them did. But my capital was exposed for a great deal longer than their capital was exposed. And I was willing and able to be very patient when looking for an entry. If I go three or four days without a trade, it doesn’t bother me in the least. My focus is on producing a smooth capital appreciation in my account, not building my account from $10,000 to $15,000 in XX months. Nor do I have clients looking over my shoulder asking me to trade frequently. I have the luxury of only “swinging the bat at the pitches I recognize,” as Ted Williams used to say. If I don’t see a trade set up I like, I’ll wait patiently—one will eventually come along in one of the markets I watch.

And if you look closely at my stop profit movements, there was a little “Bread and Butter” order placement going on as well. In the end, I feel that traders must master their tools, master themselves, and find a trading style that suits their strengths and weaknesses. In mentoring, I do my best to help each of my students become the best trader they can be by developing a style that suits their own strengths and weaknesses. Only then can they become the best trader they can be.

I wish you all good trading!


Timothy Morge


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