Cutting sideways trades - Aussie Stock Forums

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  1. #1

    Default Cutting sideways trades

    Hi all.

    How long do you hang on to a trade that's moving sideways?

    Setting stop and profit targets is pretty easy based on charts/system rules/fixed fractional etc.

    But if a trade doesn't move against you and stop you out, but doesn't go far enough to hit your profit target, how long do you hang on to it?

    Until it does hit one or the other? Do you re-analyse the chart and when it gets to the point that you say "I wouldn't take a trade here" you exit? Are there any systems (like FF) that define opportunity cost?

    Is it purely a discretionary preference? Do people define a "time stop"?

    Interested in people's thoughts...

  2. #2
    white swans need love too Timmy's Avatar
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    Sep 2007
    Between the lines

    Default Re: Cutting sideways trades

    Short answer is I view my positions with distrust and impatience ... I want to see the trade moving in my favour to give me a reason to hold it. I have a contract with a position: "Perform or you're cut". This is a different approach to believing in the position and allowing it time and space to work out.

    Longer answer. When in a trade I'm constantly monitoring price action development. Watching for whats happening, and for what is not happening. Trying to wrestle with confirmation bias, trying to honestly assess what is going on without regard to my current position. Trying to place the current action in the context of the 'trend' (so I am not placing overemphasis on immediate price action ... AND accepting that the trend I think is in place can change - indeed, will change). I find none of this easy - but the "Perform or you're cut" clause in the contract does ease it somewhat.

    I don't use a defined 'system', I have a process, a set of tools, a view, a series of questions I am asking about price action ... it is discretionary, but in a systematic way.

    I don't have a hard time stop (I do have a hard price stop). But I am very impatient with positions. Perform or you're cut. Some of the time I cut a trade that then comes good (I believe this is a subsection of Murphy's Law). Some of the time I cut a trade & the market then hits where my stop would have been (whence I allow myself a momentary feeling of being a genius - a feeling the market usually takes care of dispelling quite quickly).

    This approach may or may not be helpful to anyone else, but I find it useful for what and how I trade (short-term in the ES futures).

    Be good to get some alternative takes on answers to your questions.
    The contents of this post were tested, ruthlessly, on small, cute, furry animals. Most of them were fatally harmed. Hence, if this post causes irritation, please discontinue reading immediately.

  3. #3

    Default Re: Cutting sideways trades

    Quote Originally Posted by Timmy View Post

    I don't use a defined 'system', I have a process, a set of tools, a view, a series of questions I am asking about price action ... it is discretionary, but in a systematic way.
    Do you mind to share what these questions are?

    I try to act definsively the moment I enter a position and have created a few tricks to try and reinforce this. Still I have the tendency to second guess when to move up my stop and feel this is an area for improvement.

  4. #4

    Default Re: Cutting sideways trades

    In a discretionary manner of trading--- very similar to Timmy.
    Attempting to maximize reward and minimize risk.
    Rather than attempting to gauge strength I'm always looking at signs of weakness and or confirmation of bullish consolidation.Consolidation is good and it's what goes on in consolidation which indicates where price is likely to go.
    Is it accumulation or distribution in the consolidation.
    Do I want to stay through this or leave?

    In my view being able to read consolidation is one of the most important skills a technical trader can develop.
    Most are only interested in identifying bullishness
    And forget weakness and consolidations.
    But I think once you've traded markets that are easily traded long and short--- like Timmy has ---- the importance of the other two aspects of trading technically become very apparent.

    Opportunity cost is always a concern-- with many moves in our direction daily sitting in a consolidation or a weak reversal can often feel counter productive--- sometimes it is
    My main rule is that if the consolidation turns into a correction then I'm out.

    Weakness appears in STRENGTH so often like in 2 current trades I've been playing with
    RED and PEN I have exited in apparent strength.
    I could be wrong so exited early on both $2.23/4 on RED and .069c on PEN
    While I see what's going to happen I have a conditional buy on both 1 tick above yesterdays high. That's my insurance on my analysis.

    In a systems approach you can test out periods of consolidation
    There are many ways to do this--- from simply a time stop to a reversal % stop.

    Great and VERY important topic pretty well always overlooked.
    Certainly the Fundamental traders don't seem to consider this aspect of trading.
    From what I've seen they initiate the HOPE indicator.

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