Trading discipline: Letting your winners run

[Wysiwyg]

Originally Posted by Wysiwyg
First of all your friends have to be supportive of the ideas you have.They can affirm success with their words and help with observation and knowledge.

Why??

Humans have a greater success rate when in a group working toward the same goal.They can affirm success with their words and help with observation and knowledge.Sure, there are a few individuals who don`t need anyones support.

When does a broker push a stock for or against you??

When a brokers report or a buy/sell/hold recommendation is pushed toward financial institutions (retail funds, hedge funds etc.)Churning a stock, pump and dump.
Brokers do have weight.

 

[AlterEgo]

Why??

Humans have a greater success rate when in a group working toward the same goal.They can affirm success with their words and help with observation and knowledge.Sure, there are a few individuals who don`t need anyones support.

I don’t agree. Friends (unintentionally) hinder your performance, not help. To succeed at trading, you need to be doing the opposite of what the majority is doing. Listening to all your friends “hot tips” and suggestions is a recipe for disaster (unless your friends are expert traders, with a similar trading method and timeframe to your own, which is very unlikely).

 

[IFocus]

I would just like to tip this train of thought a bit.

Does anyone consider that the financial system you are dealing with `determines` the amount of success or failure?A trading method and the individual trader has to be accepted by the system for the trader to become financially successful.

No

First of all your friends have to be supportive of the ideas you have.They can affirm success with their words and help with observation and knowledge.

No in fact they can bring their own bias which is most likely to conflict with your own causing you to suffer cognitive dissonance.

Secondly the brokers you are dealing with have to want you to be successful.They can push a stock in your favour or give you truths.Your success is the brokers success.

No

Thirdly the market you are in determines profit or loss from a trade!Not your method!The epitomy of vanity is when you `think` you are in control.We are all players in the game to serve someones purpose and to have our purposes met.

IMHO market conditions determine profit levels but a reasonable trader should be profitable in all market conditions, being able to stand aside is a critical component of this.

When I am on my game its when I am aware of the type of market I am trading.

I am talking about discretionary trading

 

[MichaelD]

Humans have a greater success rate when in a group working toward the same goal.

This might apply to other goals in life, but it positively does not apply to trading. As has already been pointed out, to succeed in trading you must normally do the exact opposite of what the crowd is doing. This is hard enough to do on your own, much less with the weight of a crowd bearing down upon you.

When a brokers report or a buy/sell/hold recommendation is pushed toward financial institutions (retail funds, hedge funds etc.)Churning a stock, pump and dump.
Brokers do have weight.

C'mon, surely you are not that naive? The big money controls the markets. You think they're going to take advice from their commissioned salesmen? Brokers are merely salesmen, often of very tatty second hand goods which the big money has given them to sell to the unsuspecting masses.

 

[IFocus]

Brokers are merely salesmen, often of very tatty second hand goods which the big money has given them to sell to the unsuspecting masses.

LOL or blame those nasty short sellers............

 

[IFocus]

Re: Trading discipline. Letting your winners run.

That said, is testing the be all and end all? I've seen plenty of traders who claim they use nothing more than their own intuition

Testing to me is the holy grail there is really so much behind testing that isnt appreciated.
Sure you are trying to prove a method but its so much more
By testing you begin to train the mind what behavior is required to trade markets successfully.

Ask any mechanical trader how by back testing it open their eyes to how you really make money from markets, what works and what wont, by testing they start to understand what the parameters are when the system isn't working rather than waiting to lose a packet before coming to the same conclusion.

The penny drops simply by working on the process not throwing money at the market and learning bad habits


Trading markets is like any other enterprise in as much its all about the processes, work on and understand the processors and the profits come as a consequence


Be skeptical of any claims made including any I make, there are some who can trade as you say but sorry its unlikely to be you they are few and far between that can maintain the mental stability and discipline required. I only know one who is verifiable but she still uses all the key principles of trading and I suspect she has really only internalized everything else.

Reason I'm asking is that I'm still trying to 'find my style' and am open to investigating all options and strategies.

Stick to the basics to start with

Obviously intuitive trading sounds attractive - less dry reading, more edge-of-your-seat decision-making, etc, but also a bit more prone to emotional involvement at the expense of rationality.

Ahhh that was my dream to took me two years to find reality then I had to go back and repair the damage

I consider myself a fairly stable and rational person but I admit that I have made some bad decisions before, having held onto a stock for far longer than I should have.

Here is a clue you are just like everyone else..........follow Michaels testing advice and you will start to be different.

I suppose I'm answering my own questions here. Different styles of trading for different people - all have the potential to work and the potential to fail miserably.

Your honesty with yourself will serve you well should you choose to keep going but unfortunately as you can see there is no certainty in markets not for anyone

good luck hope this helps.

 

[tech/a]

Testing to me is the holy grail there is really so much behind testing that isnt appreciated.
Sure you are trying to prove a method but its so much more
By testing you begin to train the mind what behavior is required to trade markets successfully.

Ask any mechanical trader how by back testing it open their eyes to how you really make money from markets, what works and what wont, by testing they start to understand what the parameters are when the system isn't working rather than waiting to lose a packet before coming to the same conclusion.

The penny drops simply by working on the process not throwing money at the market and learning bad habits


Trading markets is like any other enterprise in as much its all about the processes, work on and understand the processors and the profits come as a consequence

EXCELLENT.

 

[nizar]

Re: Trading discipline. Letting your winners run.

As for Systems trading and Developement 101
Howard Bandy Quantitive Trading Systems is a good place to start although you'll need a mathamatical bent--- lots of time and patience.

Another I would highly recommend is Robert Pardo's
Design, Testing, and Optimisation of Trading Systems.

 

[strudy]

I follow a preset plan with my potential profit worked out prior to entry.
When that profit % is reached I am invariably out there and then.Greed has no say in my trading plan.
I am quite happy to let the next trader have his share of the profit.

If the stock is in a definite strong consistent uptrend,then I will then use a trailing stop loss to lock in the profits made.But they are few and far between of late.

Each stock is individual and treated as such.

Remember that it is only the activity in the market which will influence which way the share price will go.Either up or down.

 

[SGB]

When that profit % is reached I am invariably out there and then.Greed has no say in my trading plan.
I am quite happy to let the next trader have his share of the profit.

good work strudy,

You will never go broke taking a profit.... no matter how small it is.

 

[MRC & Co]

I'm still not convinced with profit targets.

Even though I currently trade high frequency, short-term (in which I believe they work the best), I personally, have missed out on quiet a few capitulations in my favour right after taking profit at a target. I prefer now to simply tighten stops.

Not that I have the largest sample (only a few hundred).

Just one opinion.

 

[Neutral]

This is the dilemma though. Set your stops too tight and you will invarialy get stopped out by the fluctuations in the SP. It may even go onto higher highs, or do the opposite. Either way you are out. I think it's all about finding that 'sweet spot' or a good stop loss % plan. But what would you do if the SP moved 3% upwards? Would you set up your trailing loss with a 1-2% tolerance of this latest movement, or would you leave it alone and hope the SP continues to climb as you only move your trailing stop in 5% increments?

On the other hand, profit targets will allow you to take from the market what you set out to achieve (if it goes up that is). It does have the limiting factor of what 'if' the SP did go on to new highs. Very unlikely in todays market.

Either way, you are profiting. But one method is more limiting than the other.

 

[MichaelD]

I'm still not convinced with profit targets.

Make that two opinions. I have yet to find a profit stop that improves expectancy. It can certainly improve win % though.

 

[AlterEgo]

I agree too. Profit targets will limit your overall return quite substantially, at least in my experience. Those occasional outlier trade returns that come up once in a while make a huge difference to your total returns at the end of the year. You'd miss out on them if you were using profit targets.

 

[julius]

I'm still not convinced with profit targets.

Even though I currently trade high frequency, short-term (in which I believe they work the best), I personally, have missed out on quiet a few capitulations in my favour right after taking profit at a target. I prefer now to simply tighten stops.

Not that I have the largest sample (only a few hundred).

Just one opinion.

Of course you're going to miss out on the occasional big move if you use profit targets... just as you'll always end up giving back some open profits if you use a trailing stop.

It's absurd to draw blanket conclusions about profit targets because they don't suit a particular style of trading - the exit needs to suit the method and the personality of the trader.

Besides, the goal isn't always to maximise net profit. I could show you many, many systems that show much larger net profit without any stops...is it wise to trade systems with no stops ? Probably not...

 

[MRC & Co]

Of course you're going to miss out on the occasional big move if you use profit targets...

It's absurd to draw blanket conclusions about profit targets because they don't suit a particular style of trading - the exit needs to suit the method and the personality of the trader.

Besides, the goal isn't always to maximise net profit. I could show you many, many systems that show much larger net profit without any stops...is it wise to trade systems with no stops ? Probably not...

Of course. But as Alter Ego says, those big runners make a HUGE difference. You need those outliers IMHO to make great money.

Exits need to suit your personality, I agree.

Need to suit your method? I also agree, however, is it not true profit targets are best for short-term trading? Which I currently undertake. And they still give me a worse net result.

My goal is always to maximise profits and minimise risk. Finding the balance.

Much larger net profit, as opposed to what base? Without stops? So when do you exit, at a profit target or never? Many systems?

 

[tech/a]

Make that two opinions. I have yet to find a profit stop that improves expectancy. It can certainly improve win % though.

And then in some trading methodologies this is the most appropriate exit.
In others such as trading new highs/lows in a market--Not so.

But as MRC says its a matter of balance.
Each has their own.
higher % win lower Expectancy
lower % win higher expectancy.

 

[johnnyg]

If I had to be brutally honest I would guess that the real cause is from two things or a combination of the two.

1. You have a small capital base that you NEED to work hard. Lets face it if you are swinging $500,000 you don't need much of a gain in your odd picks to make some good $$ as long as you have some sort of favourable R:R. Even a small expectancy you will be happyish with. But if you are swinging $50,000 every loss is a step closer to failure and every winner NEEDS to be a good one. On top of that every one that gets away is another lost opportunity and further reason to beat yourself up over. Not to mention the need to be "in" the market in case you do miss the next big one.

The answer is unfortunately have a huge capital base. If you don't have that then you MUST remove the $$ goals and shift your focus to expectancy. Which ironically is harder to do the smaller your capital .

Im having trouble letting my winners run. And I think that /\ sums it pretty much for me.

 

[Wysiwyg]

Of course. But as Alter Ego says, those big runners make a HUGE difference. You need those outliers IMHO to make great money.

Sooo, it can be observed that there are specific turning points when significant gains can be made.

These specific moments are very very very hard to wait for and subsequently the in-between trading brings me loss.

Like an internal battle with the ego saying go,go,go, now and the wisdom saying maybe tonight but if not I`ll wait until tomorrow night.

Like a young man with a new love hoping that tonight will be the night and the older man knowing that the time will come, anticipating not.

 

[kam75]

There's no best answers to your questions. Trading is whatever YOU, yourself want it to be. Don't like letting your profits run? Then don't. But make sure you cut your losses to a fraction of what your profits are, consistently on every single trade that fails to progress as planned. I have re-entry rules for stocks I've been stopped out from. Some traders don't like buying the stock back at a higher price. Nothing wrong with that approach.

There are some common rules shared by all good trading methods -

1. Sound money management!
2. Cutting losses fast!
3. Pyramiding winners and trading with the trend!
4. Incorporate your own beliefs - and not somebody's elses!
5. They are repeatable to give you consistency!

A good trading method will account for every possible contingency and automate your decission making.
all the best