GREED in Trading
- Thread starter J_Commisso
- Start date
smokey_mcPaat
Guest
you know what is ironic about greed?- i have had profits disappear and turn into losses before because i would hold out on a position waiting for a larger gain and have it quickly reverse- i learned that you have to be quick- take profits when you have them- especially a decent gain, yet i seem to leave at least $1000-$1500 /day on the table because of greed.....its one of those things you must struggle with until you know yourself well enough to get around the temptation of being greedy....
I agree. There's alot to be said about taking small profits instead of holding out for that homerun. However, I don't think you leave anything on the table if you exit according to your trading plan.
This morning I got what I thought was the top print. The volume started drying up, so I pulled the trigger-- my plan told me to get out and I did. The stock fell back and looked like it was going to tank hard. Needless to say, I was glad I got out. The next thing that happened was the stock started going up and ended up three points above where I sold. There is no way I would have thought that was going to happen by the way it was acting when I got out. I still think that I did the right thing at the moment I did it.
It's the same thing as executing your stop on a pullback and then watching it go up six points and you are the lowest print.
The bottom line is pure discipline. Either one of the above examples could have gone the other way and caused huge loses.
Playing craps is very methodical, or can be. Playing the pass and come and taking the odds is the best bet in the casino. You are trying to take advantage of the period of time inevitable in any number line when there is a dearth of the number 7. No magic, no mystery. There will be periods when there are a lot of every number from 2-12. You want to play when there are very, very few 7's.
Once in that period, the profits grow, but the size of the bets grows very rapidly. A lot of money is always on the table when that 7 finally shows, and you have played the game correctly. But you did play the game correctly.
The most difficult part of trading is taking a profit. More specifically, maximizing profits is the most difficult. Entry and stop-loss exits are relatively easy when it comes to trading compared to letting the profits run.
When the trend in craps changes and the seven shows, you leave a lot of money on the table. Hopefully, you have already put a lot in your pocket along the way. But you played the game correctly by letting the game stop you out.
Questions to ask:
1) Does my trading plan call for increasing size as profits build?
2) Does my trading plan allow for the market to stop me out at the end of a run?
For the record, these are two questions I am working on presently.
Once in that period, the profits grow, but the size of the bets grows very rapidly. A lot of money is always on the table when that 7 finally shows, and you have played the game correctly. But you did play the game correctly.
The most difficult part of trading is taking a profit. More specifically, maximizing profits is the most difficult. Entry and stop-loss exits are relatively easy when it comes to trading compared to letting the profits run.
When the trend in craps changes and the seven shows, you leave a lot of money on the table. Hopefully, you have already put a lot in your pocket along the way. But you played the game correctly by letting the game stop you out.
Questions to ask:
1) Does my trading plan call for increasing size as profits build?
2) Does my trading plan allow for the market to stop me out at the end of a run?
For the record, these are two questions I am working on presently.
smokey_mcPaat
Guest
thats important inandlong- to have a defined trading plan- i treat it as my business plan- its about 5 pages long and covers many facets of my trading-- strategy/discipline/ problem areas & remedies/ entry/exit paramaters, etc. have a plan and treat this as a business, because it is.
There seems to be different sides on the topic of greed. What if those that agree that greed can be good and bad are both profitable. How can that be?
I've come to realize that it's ok to be greedy, and other times not ok to be greedy. I think it's ok to be greedy in the long term, only if you define greed as by wanting a better scorecard. If you were able to sustain life with your returns last year, wouldn't it be greedy to want better returns this year? I don't find anything wrong with wanting a better scorecard this year.
From what people have said why greed can be bad, I feel it's bad in the short term, especially about an open position. Greed in the short term can cause losing profits, losses, overtrading, and possibly gambling in the market.
I think having a set plan can help eliminate mistakes that are caused by these emotions. If there is a set plan about entry, stops, exits, re-entry, position sizing, then there is no need to think or be affected by emotions.
Any comments or opinions?
Andy
I've come to realize that it's ok to be greedy, and other times not ok to be greedy. I think it's ok to be greedy in the long term, only if you define greed as by wanting a better scorecard. If you were able to sustain life with your returns last year, wouldn't it be greedy to want better returns this year? I don't find anything wrong with wanting a better scorecard this year.
From what people have said why greed can be bad, I feel it's bad in the short term, especially about an open position. Greed in the short term can cause losing profits, losses, overtrading, and possibly gambling in the market.
I think having a set plan can help eliminate mistakes that are caused by these emotions. If there is a set plan about entry, stops, exits, re-entry, position sizing, then there is no need to think or be affected by emotions.
Any comments or opinions?
Andy