Power of Consistent Profits

Five minutes a day on Duolingo doesn’t seem like much language practice. Fast forward to half a year later, it adds up to 15 hours of words, grammar and being able to say “Hello. I want Ken’s delicious bento lunch”. Capturing small profits on a regular basis might not seem like much individually but adds up over a longer period of time, increasing our total profit by a significant amount.

Perfect Profit Points

Closing a profitable trade is hard. We want the ‘right’ price. Not the one where price rises even more as soon as we’re out of the trade. We want the price giving us maximum profit and zero FOMO. These are natural trader tendencies and impossible to get right every time.

One huge profit or 10% to 20% consistent return on capital? Personally, my short-term trading style is better suited for capturing the smaller moves on stocks. Aiming for the larger returns requires another strategy and a longer timeframe.

Past ASX Trade A1M

The following past trade on AIC Mines - A1M, shows the thought process and decisions made in the final days of the trade.

Strong Trend Identified

📈 Classic textbook GMMA uptrend was in place. The short-term GMMA was above the long-term GMMA

🔵 Support from short-term traders as indicated by the widely spaced lines in the short-term GMMA

⬆️ Good support from investors as indicated by the widely spaced Exponential Moving Average - EMA lines in the long-term GMMA

🔥 Gap between the two groups showed good strength in the uptrend

Breakout

Price broke through and held above support and resistance at 0.375.

The previous downtrend was broken and price left the 52 week low of 0.26 far behind

 A1M Position Opened

🎯  Target Profit 0.50

❇️  Entry at 0.42

🛑  Stop Loss at Average True Range - ATR of 0.35

Tracking the Trade

Price started to rise and a couple of days later after entry, a red candle formed with a long wick rejecting the higher price of 0.445. A small concern at the time. I don’t read too much into spikes like this when the focus is on the major trend in place. Signs of weakness in the GMMA trend indicator is more of a warning sign and an alert to monitor trades more closely.

Intraday Profit Target achieved

My trading rules for the daily chart tell me to wait for a close at end of day before making any decisions to close a trade position regardless of whether it is a profit or loss.

It was tempting to close the trade intraday after it reached the target profit of 0.50 but I had to stick to my trading plan.

Fighting the Psychic within

We like to think we know what will happen to price and often we don’t. At the point on the chart where price hit 0.50 it looked like the uptrend had more to give over the short term.

I have made this mistake too often in recent times of not taking my targeted 10 -30% return. Positively looking into the future and ‘seeing’ more profits coming my way is not a guarantee. Often price hit the target profit before retracing back to the entry point taking all my profit down with it.

I had made a promise to myself to obey my trading plan.

A1M Position Closed

The next day price fell in the first half hour of trade. I knew no matter what, I wanted to close out the trade no lower than the target profit of 0.50. A few attempts to capture the higher prices were unsuccessful as I moved and amended my order lower. Finally, the trade was closed at exactly 0.50 as marked by the orange star on the chart.

Post Trade

The day after the position was closed price continued to fall below the 0.50 profit target.

There may be more profit after the trade is closed but continually making repetitive small percentage gains is enough for me compared to chasing the elusive perfect profit point.

It’s hard to take a profit while thinking there must be more money to be made. We can’t get it right every time and sometimes yes, there is more. Banking in a profit, big or small, is always a positive for the trading account. Consistent profit taking in short-term trading has the power to compound making a noticeable difference over a longer period of time.