Having the nerve to 'ride your winners'

[Aussiest]

I guess i am posting this in the Beginners section as i consider myself a relative newby.

Looking over my trading these past weeks, i have realised i could have made so much more $$$ had i have held on and rode my winners. Don't get me wrong, i am very appreciate of the profit i have made, but somewhere along the line i convinced myself that taking a small - modest profit is better than hanging on and risking losing it all.

What do you think? How do i establish myself to ride my winners more?

[prawn_86]

Trailling stops...

[beamstas]

"You can't make a large profit by taking a small profit" - Nick Radge

Thats a quote straight from the book -- i suggest you buy a copy

You need to get your win/loss ratio as high as you can. No one can win 100% of the time so letting your profits ride is critical

If you are really struggling, sell half your position at 2R and take some profit off the table.

The ride will be alot easier with half a position. It's less profitable to take half your position off the table -- but it sounds like you are struggling with the phychological side of the trade

Brad

[Aussiest]

it sounds like you are struggling with the phychological side of the trade
Brad

Yes, i am. Thanks for the tips. Keep them coming ;)

I'm going to check out Nick's book "Everyday Traders". There's a thread on it somewhere in these forums.

[beamstas]

Yes, i am. Thanks for the tips. Keep them coming ;)

I'm going to check out Nick's book "Everyday Traders". There's a thread on it somewhere in these forums.

I'd suggest you look at "Adaptive Analysis of Australian Stocks"
Read the first 50 pages about 40 times over until it is tattoed onto your brain ;)

Brad

[johenmo]

The 50 pages of adaptive analysis is covered in his 2 DVD pack "The profitable trader". Just finished it last night. Answers some of the questions I had from the book. Wish I hadn't been so tight and not bought it some months ago.

Luckily I have a friend who recommended it. Some will disagree wiht parts of it - but everyone has their own style.

I think it's worth it - will watch it again in a couple of months.

Nick's comment is don't concentrate on making money, concentrate on the process. For more detail, buy the DVD.

[Aussiest]

Thanks for your recommendations. Somewhere along the line i have switched from focusing on the right trades, to making money. Not good.

[MS+Tradesim]

Aussiest,

Do you have predefined exit strategy?

[Aussiest]

Aussiest,

Do you have predefined exit strategy?

The appearance of any profit!

No, seriously, i usually aim to be out of a trade by a certain price level, however, i find i am influenced by market conditions (such as price fluctuation) and most times, exit the at a modest profit rather than at the profit i could have made, had i have been patient and held on for a week or so longer.

Interestingly, i made "not being greedy" part of my trading strategy about 6-8 months ago, but have now found myself at the other end of the scale. Surely, there must be a middle ground?!

An example may be, i make $400 profit, when i could have made $1,500 had i have held out. And, the signs have sometimes been bullish (eg, many more buyers than sellers).

Another example may be: i buy a share at 29.00, it goes down to 28.00, and by the time it gets up to $29.50, i am so relieved/excited that i have made a profit that i close it out because "any profit is better than no profit".

It's like i've got "trading anxiety".

Grr

[MS+Tradesim]

Aussiest,

The reason I ask is because it's easier to hold your position if you have clearly defined exiting rules. If you take small profits before they can turn into big profits you will probably be more likely to allow small losses to become large losses. The reason is the same....the fear of losing money.

The best way I know (and others will have other ideas) how to avoid this is to have a set of rules that you know have an edge and that by following the rules you will lose some times but over an extended number of trades your equity will increase consistently.

This comes back to focusing on trading instead of on making money - a point some have already made. I still lose track of this at times.

[Aussiest]

Aussiest,

The reason I ask is because it's easier to hold your position if you have clearly defined exiting rules. If you take small profits before they can turn into big profits you will probably be more likely to allow small losses to become large losses. The reason is the same....the fear of losing money.

The best way I know (and others will have other ideas) how to avoid this is to have a set of rules that you know have an edge and that by following the rules you will lose some times but over an extended number of trades your equity will increase consistently.

This comes back to focusing on trading instead of on making money - a point some have already made. I still lose track of this at times.

Yes, thanks for your post.

Do you mean, for example, loss would be 5% and win would be 15%?

[Aussiest]

Eg, if i plan to enter XXX long at 26.50, i would set my stop loss at $25.17 (buy price less 5%), and set my exit for $30.475 (buy price plus 15%), if it all looks reasonable on the chart?

Example only.

[Trembling Hand]

The best way I know (and others will have other ideas) how to avoid this is to have a set of rules that you know have an edge and that by following the rules you will lose some times but over an extended number of trades your equity will increase consistently.


That's it really. If you know your system is profitable over 100-200 trades and how it preforms 2 things will come from it. Your next trade will not be causing you great anxiety because it will work or it won't. its no threat to you or your survival.

The second thing is that you soon realise that you need to let your winners run a bit its the best thing to enable you to survive. In spite of the cliche you can go broke taking a profit.

[Stormin_Norman]

the gentlemen are very much correct. having a system is vital. dont treat the dollars as money, treat them as a 'score'.

having emotional attachment to the 'money' causes you to let your losses run and to cut your winners early.

when really, you need to do the opposite.

[Aussiest]

Yes, you're right. I needed a good :whip.

Back to the drawing board to refine, refine, refine.

[Mr J]

What's your trading style? You could let HA candles take you out, a change in trend (i.e. not continuing higher lows and higher highs, or lowers lows and lower highs). Using points of support and resistance is also useful.

As mentioned, leaving half on the table is a good way to combat it. It's a good trade-off between overall profitability and consistency, as leaving it all on the table will lower your winrate (which requires much confidence and mental/emotional stability).

[disarray]

i haven't really seen many "runners" recently. the amount of profit given back by not jamming the stop right up the prices backside far outweighs any profit i might have made by "letting it run".

i've gone through all my old trades over the last year or so and my biggest mistake has been to not have aggressive stops, especially after a strong breakout. i think in this environment lots of traders are just grabbing quick profit wherever they can because it is so volatile with such outrageous swings, probably caused by traders grabbing quick profits because its so volatile with outrageous swings etc. etc.

so letting it run not only causes you to give back lots of open profit when the price invariably turns around / shakes out / triggers masses of other stops and you end up, at best, hitting your breakeven stop.

until i see some steadier trends i don't think many stocks have the potential to be ridden far anyway. even the bluechips have (until recently) had some massive price movements which would trigger any sane persons stop losses.

[Mr J]

so letting it run not only causes you to give back lots of open profit when the price invariably turns around / shakes out / triggers masses of other stops and you end up, at best, hitting your breakeven stop.

Yes, in choppy markets. If it's a trendy market (and remember, what many would consider "noise" are often many little trends to shorterm traders), then letting winners run will work extremely well. Letting winners run is a trade off; you significantly lower your winrate in order to hit the occasional home run. It requires patience and solid mental and emotional control.

[Aussiest]

Yes, in choppy markets. If it's a trendy market (and remember, what many would consider "noise" are often many little trends to shorterm traders), then letting winners run will work extremely well. Letting winners run is a trade off; you significantly lower your winrate in order to hit the occasional home run. It requires patience and solid mental and emotional control.

That's the problem. It has been a choppy market.

An example is WPL. Bought in at just under $35.00, sold out at just over $36.00, when i knew it would most likely rally until at least $40.00 (a resistance line). Don't :banghead: me, i know i did the wrong thing.

There has been the opportunity for letting a few shares ride with this recent rally, but if it was a deadcat bounce (although i don't think it will as bad as November's), it may be more difficult to trade the volatility and letting winners run will be the strategy.

[tech/a]

That's the problem. It has been a choppy market.


I would hardly call March choppy!
Nor the run down from Dec to March.

You need to find a way of defining and recognising possible major turning points in the longer term.

There are quite a few.
Elliott
Dilernia's principals.
Point and Figure.
or a combination of analysis.

Know this and you'll be able to trade the majority of the time on the right side of the market.

If your trading the top 200 or so you really only need to be on the right side of the index.

[Mr J]

That's the problem. It has been a choppy market.

I only started trading recently, so I don't have anything to compare it to, but if this is choppy I'd love to see a trending market! Also consider what I said about timescale, what may be choppy one one timescale may be trendy on another.


An example is WPL. Bought in at just under $35.00, sold out at just over $36.00, when i knew it would most likely rally until at least $40.00 (a resistance line). Don't me, i know i did the wrong thing.

That's being results-oriented though. Perhaps the sell at $36 was a good trade, and it just happened to move higher?


You need to find a way of defining and recognising possible major turning points in the longer term.

Or price action :p:.

[Aussiest]

I would hardly call March choppy!
Nor the run down from Dec to March.


Sorry, i was referring to the past 12 months.

Elliot Wave Theory - interesting.

[Aussiest]

Perhaps the sell at $36 was a good trade, and it just happened to move higher?

No, it wasn't because i had planned to keep them for longer and to sell at around $38. Just goes to show i am a wuss.

[Mr J]

I was assuming you got out because you thought it was the right decision. Ideally, you should only be exiting a trade when the market tells you to exit.

[MRC & Co]

Agree with your points Mr J.

Depends on timeframe and market conditions in that timeframe.

Taking half off and letting the other half run can be useful at certain times.

[So_Cynical]

I suppose u just have to get used to the fact that there's no nerves
needed with a trailing stop....i too suffer from premature profit taking.

I had my first panic sell today. :shake: i feel a little guilty.

[Aussiest]

I had my first panic sell today. :shake: i feel a little guilty.

Sellers remorse :error:, lol

[disarray]

i see the "trailing stop" line crop up a fair bit, but the real question is how far do you trail?

6 days is seeing huge swings which can triple your profit or cascade down through a wall of stops (increasing the chance of you getting filled at an even lower price), and waiting this long can cost you a great deal of money in either lost potential or crappy fills.

in a smoother market then longer trails are probably better to capture greater % moves but in this environment i'm thinking stop discipline needs to be flexible.

if theres a strong breakout with big price movement then jam the stop right up the prices backside to take advantage of it because it will almost certainly reverse savagely as the institutional players with their large positions cash in leaving us poor retail slobs with obnoxious price action. if the breakout is slow and steady then you can probably trail at a further distance.

nothing is written in stone and trading is a PVP game - you're not playing the chart, you're playing the traders. the rules keep changing so i think its important to adapt.

[Mr J]

I adjust the stop manually, as I'm currently testing different stop placements.


in a smoother market then longer trails are probably better to capture greater % moves but in this environment i'm thinking stop discipline needs to be flexible.

You should be able to use tighter stops in smoother markets. Noiser markets you'd need a larger stop or pass on trading altogether. I say "noise" instead of "volatile" because volatility is good as long as it is tradable.


f theres a strong breakout with big price movement then jam the stop right up the prices backside to take advantage of it because it will almost certainly reverse savagely as the institutional players with their large positions cash in leaving us poor retail slobs with obnoxious price action.

Only for the retail traders that took bad prices. If they took a good price, they would have had plenty of room to get out with a nice profit. Remember, we're faster than these big guys and can do well leeching off of them.


nothing is written in stone and trading is a PVP game - you're not playing the chart, you're playing the traders.

But we're all playing a different game. As a shorterm intra-day trader, I'm looking to take advantage of the smallest of moves and any inefficiency, and have the mobility to be able to get in and out quickly. Institutional traders are far larger and clumsy by comparison, and I feed off of their inefficiency. Every move they make is a potential opportunity for me. They're not my enemy, they're my prey. My enemy is the trader looking to make the same trades as me and trying to take the prices I want to take. Fortunately, there's enough inefficiency to go around :D.

At least that would be my perspective if I was a profitable trader (still an unknown).

[Johno]

A few ideas spring to ming by what your saying Aussiest.

Basically IMO your not planning your trade properly. Part of that planning is planning how you are going to deal with the anxiety of holding out until your profit target is met. Where are you placing these targets? Are they on pre-determined support and resistance levels? Or are they just percentage gains or round numbers youve plucked out of the sky? You dont sound confident in enough in acheiving your targets.

Also this reaks of you "listening to the noise" of the market". Do you hover over the the market every chance you get watching every movement of your stock? If so, set an appropriate stop loss, place your sell order, and switch the computer off and go do something else. Check it on open, and check it on close....thats it. Lose the noise, and especially some share market forums can really sway your direction.

Trailing stop losses are a good idea, but they can fail in choppy markets as can normal stops below your entry point. Im not a big fan of either of them, but I have all day to watch my stocks. Sounds like a trailing stop might take some anxiety out for you.

Also and this is IMO the biggest thing. Markets spend only about 20% actually moving. The rest of the time your stock is consolidating - example - moving backwards or moving sideways before the next large move. Stocks contract and expand in price movement. If your stock moves, your in the 20% timeframe so your best staying with it until its complete. All your doing right now is taking a small profit, and then spending more time waiting for a new stock to finish consolidating and finally move (and thats if it doesnt fail on you). Which brings up another point. Your risking far more of your capital than you need to by constantly entering new trade set-ups. Your failure rate increases a lot when every time you enter an unknown trade.

My advice would be to pick a few stocks that you like and know and just trade the guts out of them to their full potential making sure your in the right sector at the right time. And stick with the trade!!!

[canaussieuck]

But we're all playing a different game. As a shorterm intra-day trader, I'm looking to take advantage of the smallest of moves and any inefficiency, and have the mobility to be able to get in and out quickly. Institutional traders are far larger and clumsy by comparison, and I feed off of their inefficiency. Every move they make is a potential opportunity for me. They're not my enemy, they're my prey. My enemy is the trader looking to make the same trades as me and trying to take the prices I want to take.

Well said mate, very well said.

Looking forward to learning more about your trading style.

CanOz

[Johno]

Also if your trading stocks that are too choppy, your in the wrong the stocks IMO. There are HEAPS of stocks out there that are trending up nicely. Use your MA's to indentify stocks that are actually in an extended trend and stick with them.

[Johno]

But we're all playing a different game. As a shorterm intra-day trader, I'm looking to take advantage of the smallest of moves and any inefficiency, and have the mobility to be able to get in and out quickly. Institutional traders are far larger and clumsy by comparison, and I feed off of their inefficiency. Every move they make is a potential opportunity for me. They're not my enemy, they're my prey. My enemy is the trader looking to make the same trades as me and trying to take the prices I want to take. Fortunately, there's enough inefficiency to go around :D.

At least that would be my perspective if I was a profitable trader (still an unknown).

Exactly right. Your goal should be to aggresively take as much money as you can from someone else's pocket because thats exactly what they are trying to do to you.

[disarray]

I adjust the stop manually, as I'm currently testing different stop placements.

aren't we all ;)

[Mr J]

aren't we all ;)

I'd prefer not to be, as it'd mean I have a stop strategy I'm 100% confident in. Right now I'm keeping track of different stop sizes, letting it run, trailing stops and how much confirmation to wait for. I'm not sure it's as significant as I thought it would be, just as long as the stop isn't too large and we let winners run.


Well said mate, very well said.

Looking forward to learning more about your trading style.

CanOz

It's pretty standard for trading, but it's based off my sportsbetting philosophy. It's simply based on getting a great price, and taking advantage of price movement. This isn't common among sportsbettors, who like many investors try to pick the winner.

My theory on the great price is that sports markets fluctuate around the true value, so taking a price at or near either extreme would be profitable in the longrun. I didn't care about the team, injuries etc, I just focused on getting a great price, or passing if I couldn't.

Now to price movement, there are moves just like in the financial markets. A strong move over a short period in sportsbetting is called "steam", and like in the financials, the sharp money gets in early while the herd gets in later. Like the financials, there's often a reversal as the sharp money buys back, or if they missed the original move, take the other side since it's often value.

Transfer that to financials and trends would be my "steam". I'm less interested in trying to identify reversals at this point.

[MRC & Co]

But we're all playing a different game. As a shorterm intra-day trader, I'm looking to take advantage of the smallest of moves and any inefficiency, and have the mobility to be able to get in and out quickly. Institutional traders are far larger and clumsy by comparison, and I feed off of their inefficiency. Every move they make is a potential opportunity for me. They're not my enemy, they're my prey. My enemy is the trader looking to make the same trades as me and trying to take the prices I want to take. Fortunately, there's enough inefficiency to go around :D.


Interesting, which platform do you use to execute quickly enough to take advantage of any inefficiency spotted and which instrument do you trade?

Cheers

[Mr J]

I'm sure there are many ways to define inefficiency when it comes to the financial markets, but my version would be the fact that the market rarely agrees on price, hence the fluctuations, and this is the inefficiency I'm mainly trying to take advantage of. I'm not trying to beat scalpers, black boxes, arbitrageurs etc. Again, this is just my opinion, and it's not built from experience.

[MRC & Co]

Ah k, so which platform do you use to execute?

[Mr J]

IB.

[Bobby]

I

But we're all playing a different game. As a shorterm intra-day trader, I'm looking to take advantage of the smallest of moves and any inefficiency, and have the mobility to be able to get in and out quickly. Institutional traders are far larger and clumsy by comparison, and I feed off of their inefficiency. Every move they make is a potential opportunity for me. They're not my enemy, they're my prey. My enemy is the trader looking to make the same trades as me and trying to take the prices I want to take. Fortunately, there's enough inefficiency to go around :D.

.

Hello Mr J ,
After reading the above I feel your forte could start with the SPI , do you need funding ?

[So_Cynical]

I had my first panic sell today. :shake: i feel a little guilty.


Sellers remorse :error:, lol

Payed for it today with ALL up over 5%...so missed out on the easiest 500 bucks of my
life for the sake of a little belief and 1 lousy day....absolutely spewing. :disgust: :crap:

[Mr J]

Hello Mr J ,
After reading the above I feel your forte could start with the SPI , do you need funding ?

I'm kind of baffled, as that looks like an offer?! If it is, then I couldn't accept as I'd want more confidence, experience and results before being responsible for anyone else's money.

[Bobby]

I'm kind of baffled, as that looks like an offer?! If it is, then I couldn't accept as I'd want more confidence, experience and results before being responsible for anyone else's money.

It is a possible offer , like your rhetoric so far , do look at the SPI & get back if you wish please :)