If the trading system has not been established, then only by solving the opening problem through a reasonable profit-loss ratio can you form trading rules, which are actually corresponding to each other.
The same source of profit and loss, whether it is stop profit or stop loss, solves these two problems from the perspective of trading logic. If you follow the trend-oriented buying mode, then the trend change is the time for you to close your position and take profit. You only need to define the trend, and the signal of change will stop profit. Then the logic of stop loss setting must be that the trend does not continue along the main direction after opening the position, so it is best to oscillate or reverse the trend, then the stop loss must be done.
For example, if the intraday breakthrough comes into play, the logic of opening positions is the breakthrough point of consolidation or the breakthrough point of intraday trend turning. Once the position is opened, it will go out of the unilateral market.
1. The logic of profit taking
Take profit is very simple. When the market ends the current trend and enters the fluctuating trend again, you should close your position and make a profit.
2. The logic of stop loss
It also stems from breakthroughs. If you break through, you can't buy it. If there is no breakthrough, it means that the logic is not established and we should consider stopping and leaving. For the setting of stop loss and take profit, we should also observe one point: a reasonable profit-loss ratio. Usually, the convention in the futures market is that the profit-loss ratio is not less than 3: 1, where 1 does not refer to a price, but refers to the ratio of the maximum profit space to the stop loss space, which is limited to 3: 1. The higher the proportion, the better. The higher the profit, the more naturally you can hedge the losses of several stop losses and realize big profits.
For another example, many traders like to grasp the bottom and belong to the shock trading mode.
When defining the oscillation interval:
Opening a position is to short on the upper rail of the interval, break the stop loss at the highest point of the upper rail, and approach the profit of the lower rail. Buy more orders in the lower rail of the interval, fall below the lowest stop loss of the lower rail, and close to the flat more orders near the upper rail.
This is the logic of take profit and stop loss.