I think it is natural for most people to hope that losing positions will come back, and to fear that winning positions will go against them.
But, that is exactly backwards
But, that is exactly backwards
Average holding time for winning trades
- Thread starter LelandC
- Start date
Yes indeed this folly is in accord with the human condition, BUT in complete and utter discord with her...
We are selfish and needy and she is selfless and indifferent, how could there be any harmony???
Livermore put it nicely when he said that one has to learn to flip these two natural emotions, but IMHO he misses the point... Every time I read that quote I picture Neo trying in vain to bend the spoon when all he has to do is realize what the little boy is telling him to realize, the truth... that the spoon is not real, and as such it will be Neo that bends and not the spoon...
PEACE and good trading,
Publias
I was having the same problem as Leland and since I started doing exactly what rs7 suggests above, my holding time and size of my winners has increased. At some point you will get so sick of misssing out on the bigger ganis, you will finally change your behavior.
Here is another thing that has helped me to hold winners longer. If I start getting that feeling that I am going to say, cover a short too soon, I will instead put on small shares long a stock that looks strong. Sure some times I lose small on that long, but if I am in a stock that is truely being sold on the short side, it usually more than makes up for it, and I'm not sitting on the side lines saying to myself "I wish I would of stayed in....again."
At least you are cutting your losses as quickly -- I often find that the only trades I manage to hang out to for more than 3 hours are losers 
I'm also trying to ride my winners longer, but it's a tough process to learn and takes some time, at least in my case. Remember that when you expand your profit targets, you are also subjecting yourself to more retracements, and more smaller open profits going right back down to 0 or worse. Planning to sit through retracements is a real leap of faith in terms of trading style I think, and I think for some people it may just not be worth the effor. Last week I shorted CYMI at around 27.70, looking for a target of around 21, and spent yesterday and this morning watching 90% of my profit evaporate. Yet it's the price one pays for seeking a 6 point target -- perhaps I could have been a bit more nimble Monday morning but I was determined not to "trade around" this position.
So it's give and take -- I think rs7 makes a good point in keeping a partial position to get used to the idea, take baby steps and keep in mind the compromise in what you are trying to achieve.
I'm also trying to ride my winners longer, but it's a tough process to learn and takes some time, at least in my case. Remember that when you expand your profit targets, you are also subjecting yourself to more retracements, and more smaller open profits going right back down to 0 or worse. Planning to sit through retracements is a real leap of faith in terms of trading style I think, and I think for some people it may just not be worth the effor. Last week I shorted CYMI at around 27.70, looking for a target of around 21, and spent yesterday and this morning watching 90% of my profit evaporate. Yet it's the price one pays for seeking a 6 point target -- perhaps I could have been a bit more nimble Monday morning but I was determined not to "trade around" this position.
So it's give and take -- I think rs7 makes a good point in keeping a partial position to get used to the idea, take baby steps and keep in mind the compromise in what you are trying to achieve.
Originally posted by rs7
Good in theory, but I disagree in practice.
I think sometimes you need to give yourself (and your trade) a little room. No one has perfect timing. If I were down 10 cents in a trade, I would ask myself if I was wrong, and the stock was weakening (based on the group, the market, futures, whatever), or if maybe my timing was just off a bit. Sometimes a strong stock can get a bit "tired". This is different than getting "weak".
As far as upside profit targets....I don't really believe in them. After all, there is unlimited potential on longs, and even shorts can conceivably go to zero. Without a reason for an exit, you only limit yourself. However, you cannot let a winner disappear. Someone said just yesterday here that you can treat winners with a "trailing stop" mentality. Promise yourself not to let X% of the gain go away. This makes a lot of sense.
Good luck, and try and "hold on tightly" as Publias would say!
RS7
Hi RS7...
It's not just theory my friend, profit targets are used
by many traders. I could quote you from many sources
(market wizards,etc.), but I'm not near my library today.
I don't believe I'm limiting myself by taking 3-1 profit. I don't
believe every long is going to the moon or every short
down the sewer.
If I risk a $1 and the market gives me $3 in return,I look
to take that profit and look for another trade.
I enjoy making 10 or 15 trades a day and showing
a profit at the end of the day.
Which reminds me...thanks again for your "successful
trading" thread. I've been doing very well with the
method I put together using my grandmother as an
inspiration.
For July I had 58.27% profitable trades with the
best day being 76.47% and the worst day being
only 30.77%.
So far for August:
8-01...55.56%
8-02...75.00%
8-05...71.43%
8-06...70.00%
8-07(so far)...2 for 2 (50%)
Not a bad start...hehe (knock on wood)
I have asked myself this question many times and have decided it has more to do with my emotional state and market conditions than anything else. A day like yesterday where things were getting whipped around at a frantic pace I find myself cutting losses quickly and at the same time closing out my winners just as quick. The end result is usually a bad day where I tread water and find a way to blow it at the end. The other end of the spectrum is a day like today where things are moving relatively slow and I feel like I am in total control. I am letting my winners run instead of getting stopped out on every little move against me.
The end result is the quicker I trade the worse my results become. The key for me would be to avoid days where things are moving quickly, but for some reason I trade them anyways. The large rewards of being on the right side of a fast moving market are just to enticing for me.
The end result is the quicker I trade the worse my results become. The key for me would be to avoid days where things are moving quickly, but for some reason I trade them anyways. The large rewards of being on the right side of a fast moving market are just to enticing for me.
very good points rs7.. I like the idea of holding 100 shares out of the 1000. Lets quantify it a little though. When you close out the 100 shares, re-calculate your profit as if you had held all 1000, or scaled out 500-500. If you do this for a while (say several weeks or a month) and you find your profit could have been larger, then you should be holding longer. If you find your profit would have been smaller (i.e. the trade goes against you after you exit), then you should be holding for less time. In this way we can make our trading adjust itself for maximum profitability. And we have hard numbers to justify the change. When you want to bail on that winner, keep looking at the spreadsheet on the wall (that you enlarged and printed out) and tell yourself that you have been here before, and there is more profit to be had, and you have the hard numbers to prove it!
Hi Leland...Here's another strategy you might try, to hold
on to your winners a little longer.
Trade in 3's...I trade the ES, so I'll use that as my
example. If you trade stocks, then substitute 100 shares
for every ES contract.
Okay...lets say I get a signal to go long. I buy 3
ES contracts. My initial risk is 6 ticks.
Here's the strategy...I sell 1 contract if the market
goes up 6 ticks ($75.00)
Now I have $75.00 in my pocket with $150.00 at risk
for a total of $75.00 at risk. You're feeling a lot
more relaxed already.
The market moves up 12 ticks and you sell the second
contract ($150.00). Now you have $225.00 in your
pocket and you move your stop to break-even.
Okay, this last contract is what we would call a free
trade. All the pressures off, you've got $225.00 in
your pocket and the stops at breakeven for the
third.
Now, you can let that 3rd contract ride!
Hope this helps
on to your winners a little longer.
Trade in 3's...I trade the ES, so I'll use that as my
example. If you trade stocks, then substitute 100 shares
for every ES contract.
Okay...lets say I get a signal to go long. I buy 3
ES contracts. My initial risk is 6 ticks.
Here's the strategy...I sell 1 contract if the market
goes up 6 ticks ($75.00)
Now I have $75.00 in my pocket with $150.00 at risk
for a total of $75.00 at risk. You're feeling a lot
more relaxed already.
The market moves up 12 ticks and you sell the second
contract ($150.00). Now you have $225.00 in your
pocket and you move your stop to break-even.
Okay, this last contract is what we would call a free
trade. All the pressures off, you've got $225.00 in
your pocket and the stops at breakeven for the
third.
Now, you can let that 3rd contract ride!
Hope this helps