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 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.