The discipline of trading is something I am still trying to master, as I'm sure many of us 'novices' are in the same boat. My dilemma is limiting my losses from profits. My current mentality is something like, "Oh well, at least the losses have not eaten into my initial capital". My reasoning behind this is that I value the stock beyond so called 'short term' reversals. But like the rest of us, I cannot predict the future and a short term reversal may turn into a long term blunder.
Too many times now I have taken profits on market reversals to see the stock regain and move well beyond my initial sell trigger. On the flipside, I have also not realised many profits and let the SP slide (but never below my initial capital). This is because I am still trying to work out this aspect of my trading.
I have seen many experienced contributors on this forum write, "Protect your capital & stick to your plan". But also write "Let your winners run and cut your losses short". This makes perfect sense to me, and I try to trade by these very principles. The hardest part for me though is, when to actually sell?
As a trader or short term investor, how do you protect your profits without selling out too soon? For example, if you saw a 10% gain, and the market reversed 5% leaving you now with only a 5% gain, would you sell, or let it go in the 'hope' the SP rallies?
Does this require a discipline of 'set target profiting' (ie, a 10% gain will trigger your sell - you are happy with this and move on, even if the SP goes beyond this) Or, as per the mantra, "Let your profits run". If the latter, do you allow for some recede in SP or do you bail and realise your profits?
When to take profits is something I haven't worked out as you can tell. Like the rest of us, my 'plan' is to make as much money as possible. LOL. But I think sometimes greed can get in the way of this very so called 'plan'. Anyone care to post their individual successful trading plans? (ie, when do you take profits?)
Sorry for the detailed post and all the questions.
Thanks in advance