Fear of loss of profit
- Thread starter Dantheman
- Start date
I had this problem when I started out trading intraday, and more recently with my longer term trades. In both cases I solved it by dedicating a small portion of my size to staying with these big moves until they finish. If you trade x number of shares, then just take 1/10th or 1/100th that number of shares and let that portion run until it becomes clear that the trend is over.
It is a hell of a lot easier to sit through retracements and sideways chopping when the position is too small to cause you any psychological pain. Instead of stressing out about giving back profits, you will be able to focus purely on the mechanics of the trade. Eventually you will build up experience running these positions for multiple point winners, and develop confidence in sitting tight through all the noise and little pullbacks, not exiting until the market gives you a genuine signal to get out.
Then it becomes a simple matter of building up size incrementally. You know rationally that the same method will work on full size as works on 1/10th size, but your nerves may not be used to it. So just build up slowly and steadily over time, eventually your 1/10th positions will become 1/5th positions, then 1/2 positions, and then full positions, and you should not have too many problems adjusting. This is also useful in that you will getting better as you get bigger, and your risk is kept to a small level until you get to a point of consistent profitability.
It is a hell of a lot easier to sit through retracements and sideways chopping when the position is too small to cause you any psychological pain. Instead of stressing out about giving back profits, you will be able to focus purely on the mechanics of the trade. Eventually you will build up experience running these positions for multiple point winners, and develop confidence in sitting tight through all the noise and little pullbacks, not exiting until the market gives you a genuine signal to get out.
Then it becomes a simple matter of building up size incrementally. You know rationally that the same method will work on full size as works on 1/10th size, but your nerves may not be used to it. So just build up slowly and steadily over time, eventually your 1/10th positions will become 1/5th positions, then 1/2 positions, and then full positions, and you should not have too many problems adjusting. This is also useful in that you will getting better as you get bigger, and your risk is kept to a small level until you get to a point of consistent profitability.
This is a fantastic post imo, and one that all newer traders, and traders shooting size but still negative should heed.
When I did that thread about trading the 15 min chart recently, for the first time in my life I traded 100 shares. And I can tell you from that experience that you are exactly right. It was very satisfying to be in and totally focused on trade mechanics. The gains and losses were not going to amount to much either way so the focus was on engineering a good trade.
For anyone new, I recommend it wholeheartedly. You won't be sorry.
I agree. I removed all the p/l things from my trading screens, and suddenly, all I was focusing on was 2 points here or 50 cents there - most importantly NOT on the dollar amount gained or lost - this makes a very big difference especially when moving up in size when it can get scary.
Making good trades is what matters and then the profits will flow anyway.
Another thing said to me a long time ago was that if you chase money you won't catch it, but if you do your job to the very best of your ability the money will chase you.
Best
Natalie
What was funny to me may not be funny to anyone else. Anyone who is into improving what he does needs to have a perspective.
I believe it is important to not substitute one problem for another and not make any progress in self improvement. It looks to me that this is what is happening. That is how I look at it.
What I take to be important is making money. I look at how to do it. There are always two things on the table when you look at making money. What you make and what it costs you to make it. What it costs you to make it is what I call an "opportunity cost" Other people in some instances do the same. Cutten is not one of those people as yet. Maybe he will become one at some point.
The essential and basic question that I give a very high priority to is asked at all times "What is going on? and why am I doing this?
See it as a question that is meaty and formed by the whole situational construct.
Cutten is in a place. He does not emphasize the time value of money. He is actually paying a fair amount of tuition because of his preferred place to operate.
I think he should leave that place ASAP and get to a new vantage point.
Time value of money.
All traders and investors must and have to focus on making their capital work for them all the time and at a feverish pace. Money velocity measures this. Pace is a time based gizmo.
Finding out when and if a trade is going to get to a given place is not in my deck of cards. What a trade is doing is what I see as what I am paying for. I pay for every moment of trading with TIME.
If anyone has an alternative to make more money elsewhere, then giddy up and be there. That unreal and maybe never occrrring future expectation or prediction of "finishing the trend" is an academic thing that has a tuition cost in TIME primarily and money secondarily.
Cutten has, in my opinion one job to do: make money as feverishly as possible. Pick up the money and place it where it belongs...over and over and over and over.
You are not dense. You are posting..it does not matter why but it is extremely important that you be DOING the post. I really am in support of everyone getting the job done. You are getting your job done. That is very very important.
If you are making money, at all times you have to know what it is costing you to make that money. you always have to choose to make the most money at the least opportunity cost. Getting out of a trade is the most profound way to have money available for EVERY opportunity to make money that you have time to find.
This month, I have four money streams running at non compounded monthly rates (for simplicity) in equities: 34%, 58%, 12%, and 22%. What is the priority that I set up to give these guys time and attention. One thing I can tell you I am not going to do is find out what when wrong not finishing the trades I abandonded when they did not keep up. I got stopped out on the lousy stream; good riddance. Come Monday, I am going to be making sure the cash I have is applied just like the 58% stream had cash applied. Istay diversified for sure, but I need to be keeping my attention on not paying the opportunity costs you see me paying in each stream less than 58%. My opportunity costs are: 46%, 36%,and 24% in declining order. I neeed to get a little more feverish here and there.
Futures are much more leveraged and that is a different ball park where a lot of money is made and the opportunity costs run a lot higher for screwing up.
Don't fart around watching things try to hit targets you thought up. Just get on your horse and make sure everything you are doing is going as well as the best you are doing.
there is a picture to see and get a firm grip on. Get it. You are anything but dense.
N,
that is a good quote to share and real pertinent to trading... interestingly... I would say it applies to other things in life, not the least of which is Love!
Also, with respect to your comments on displaying p/l, I never used to display my P/l intra-day on my screens (until earlier this year), going all the way back to early 90s. I believe that this past month, and also in June of this year, it negatively affected my decision making and exacerbated 'reactionary' emotions such that both months s*cked... in fact were the first losing months since May 2002.
Interesting.... non?
After ready your thoughts, it's convinced me... and tomorrow morning they will be removed.
regards,
ICe
If there is "a different place" that I am trying to get to, it would be to the one quoted. I have too much money sitting around doing nothing that could be... should be.... working. Perhaps not at a feverish pace; I am quite the lazybones and if trading becomes too much like work I won't do it.
That said, I appreciate the wisdom in the quote, and in the entire post for that matter. Thanks grob and nice job.