Cutting Winners Problem

[murray t turtle]

Most seasoned traders layer in & out of positions. When they are wrong they have on their smallest size, when they are in a winning trade right their position size will increase 2-4 times larger. This is an important aspect of risk/trade mgmt. It allows you to ring the register along the way while still allowing the winners to run.

When you are trading the right size in relation to your capital and follow a rules based strategy than letting profits run will become routine. So many traders these days trade so over leveraged they end up taking tiny profits and much larger loses - I doubt many of them ever had a big winner before - if they had they would not be playing for crumbs.

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Good points co magnum.
One of those older Chicago turtle traders said to draw a trend line with a crayon not a sharp pen or sharp pencil.[Paraphrase].======================================.Prefer moving averages myself ,but do you see his point,Trubor ?????/Think about that??

Trubor;a way to avoid single stock risk/reward is trade 100 stocks or some thing like QQQ, or SPY. Another thing that helped me, is study monthly charts a lot, lot of hours, lot of years. Study 10 year charts, monthly charts a lot. Even if you dont hold a stock for 10 years ; 12 months can help profits.

Study IBD books a lot; they know how to let profits ride, +sell, single stocks. Check out Carl Ichans....... old takeover of Nabisco Group Holdings, even though its single stock risk/reward.

 

[bone]

I've been trading for two years and have managed not to lose it all and have made small gains. My biggest problem is cutting winners. I did it again on Friday with Avnet. I even have a big sign on my screen, "Stop! Just move the stop!" I know this is amateur, but, has anyone found a good approach or mind set to stay in winners? (Amateur is just were I'm at right now)

Thanks in Advance!
/truber

It's not known to me if you have a consistent methodology for setting profit and stop-loss levels at the time of trade entry - after many years of trading and client work that's where I've landed FWIW.

For me, my winners are about 2 x my loser net amounts, and my Win/Loss ratio is certainly north of 50%.

I've never bought a bottom or sold a top in my life, and don't expect to start any time soon. I take what the market gives and I refuse to give in to Hubris.

FWIW it's a futile and complete waste of emotional energy to lament about what you "coulda shoulda". Your system is designed to accomplish a certain objective, and the market trading range will always be considerably more than that. You take what that system was designed to take out of the market, and then move on to the next opportunity. And you can make alot of money doing that if you can accept and live in the present tense when it comes to markets. It is what it is.

If you want more profit from the same position sizing, design longer holding time frames and be prepared to live with the corresponding risk. Alternatively, there's no shame in levering the piss out of modest profits if your loss profile permits.

Just my 2 cents, YMMV.

 

[ironchef]

I've been trading for two years and have managed not to lose it all and have made small gains. My biggest problem is cutting winners. I did it again on Friday with Avnet. I even have a big sign on my screen, "Stop! Just move the stop!" I know this is amateur, but, has anyone found a good approach or mind set to stay in winners? (Amateur is just were I'm at right now)

Thanks in Advance!
/truber

I would rather trade places with you. I have the opposite problem. I let winners ran too long and many winners ended up as losers. So now I set hard targets and forced myself to take profits once the targets were reached, and tried not to second guessed.

Good luck.

 

[bone]

... I let winners ran too long and many winners ended up as losers. So now I set hard targets and forced myself to take profits once the targets were reached, and tried not to second guessed.

When I set targets, I model recent trading ranges. If I get cute, and for example run forward regressions in order to squeeze out more - for me it doesn't have a happy ending as you suggested in your post. We only know what we know. The majority of the time the market runs past - sometimes well past, my winners. So what. It is what it is. I have no ability to predict the future, it's all about calculated risk.

 

[dealmaker]

"Nobody ever lost money taking a profit."
- Bernard Baruch

 

[Mtrader]

"Nobody ever lost money taking a profit."
- Bernard Baruch

If you believe that you should immediately stop trading, before you are broke.

 

[dealmaker]

If you believe that you should immediately stop trading, before you are broke.

check out post #31

 

[Mtrader]

check out post #31

I agree with #31. But that is completely different from the second posting.

 

[dealmaker]

I agree with #31. But that is completely different from the second posting.

Yes that is trading in a nutshell, you have to have a flexible mindset and adjust tactics as needed.

 

[Mtrader]

Yes that is trading in a nutshell, you have to have a flexible mindset and adjust tactics as needed.

I don't use a flexible mindset, I use math. I calculate mathematically where the optimal exit is for every trade. In the long run it will beat your flexible mindset. At least if you did your math good. Tactics are adjusted automatically by math.

And at least it is objective. Flexible mindset is not objective as it is influenced by external factors, sometimes even without you noticing it. Math always gives the same result. Good mood, bad mood, optimistic, pesimistic... have no influence on math results.