| APR 1994
On Profit-Taking by Perry J. Kaufman
On Profit-Taking by Perry J. Kaufman Taking a profit should be so easy, but it never seems to be. Why is that? Veteran market analyst Perry Kaufman explains the whys and hows and also explains how profit-taking has advantages over straight trend-following. If you were to ask a trend-follower, “How do you trade successfully?” the answer would be, “Let your profits run and cut your losses short.” That seems to be the philosophy underlying trend-following programs. One of the most stunning examples is gold, which in January 1980 skyrocketed from $100 an ounce to $850 an ounce. During the period that gold prices were soaring, there were good opportunities to take profits at $250 an ounce and $400 an ounce, but neither would have been close to the profits possible if a long position had been held simply using nearly any trend-following method. For example, Figure 1 shows the move in silver during the 1979-80 period, which could have captured exceptionally large trend-following profits. The high volatility that followed, however, may have reduced those returns. In Figure 2, a chart of the Deutschemark, profits look large, but realistic entry and exit points show that only 200 points could have been captured from a maximum of 800. The very high volatility would have demanded a large investment for a small return. Returning frequent profits is far more desirable than waiting for such an opportunity. Spectacular price moves do not occur often enough to be worth sacrificing a good, everyday plan. In addition, the risk associated with a major move is correspondingly very large and requires a bigger investment to protect an infrequent occurrence.
by Perry J. Kaufman
Technical Analysis of STOCKS & COMMODITIES
The Traders’ Magazine since 1982
has had over 1,226,237 subscribers from 174 different countries.
37,000 Page Traders’ Archive for $89.99
To continue reading, sign-up for trial access to Traders.com and the S&C Archive — 37,000 pages of trading ideas!
After verifying your email address, you will have limited access to the S&C Archive, as well as access to a Digital Edition of S&C, and access to Traders.com Advantage and Working Money for 30 days.
Not a subscriber to Technical Analysis of
STOCKS & COMMODITIES magazine?
Click
here to subscribe, or request
a trial subscription.
Log-in now to view articles from the S&C Archive.
Your Subscriber ID is located at the top of your magazine label, highlighted here in red.
Your last name can be found on the second line, highlighted here in blue.
*If you have a company name on the label, that can also be used. It will appear below your name on the label.
If you do not have a Subscriber ID on your label, you can find it on your statement or renewal form.
For help locating your Subscriber ID number, please call us at 1-800-832-4642 or send an email to Survey@Traders.com. If sending an email, please include your name and mailing address.