Quote from NoDoji:
Price came within 1 tick of target and stopped me out b/e.
Nice that you bring this up (not nice that it happened to you, though
)I think that one of the most valuable things in trading is learning to be consistent in your execution and that this is particularly hard when it comes to your profitable exits. I don't mean that you cannot change over time how you execute your trades, but that you have to consistently execute them the same exact way over a period of time long enough to test and determine whether your execution style is serving you well (i.e. whether it is a good fit with your particular strategies).
Take Nodoji's trade, for instance. When that happens a couple of times, what do most people do? They start either taking profits before their target is hit or trailing aggressively their stops. This of course prevents them from giving away all their profits, but it also has the unintended and unwanted side effect of deteriorating their R:R, which will end up costing them way more money that having the occasional "rogue" trade.
(I find that when you have smaller targets in tighter R:R relations it's better to leave them alone but that as you increase your R:R it makes more sense to "sandwich" your positions as they approach their targets).
Also, suppose she had taken profits one tick before the target was hit and then price had skyrocketed in her favor. That happens a couple of times and suddenly most people think that they shouldn't take profits at their targets, but instead "let their winners run". So they try that and after a while they start having trades that go past their profit target and then come back all the way down to breakeven or the stop loss, i.e. they let their winners run... away.
This happens also of course with stop-losses, but a) most entry signals are "harder" or more clearly defined than targets that tend to be "softer"; and b) I'd say most people find it easier to re-enter a trade that was stopped out at a small loss or BE than a trade they've got out of after it went a long way in their favor.
On a related note, I think this influences how averaging down is ever so tempting whereas averaging up is so hard to do that most people simply give up on it (for every trader that averages-in as the position moves in his/her favor you have ten that go all-in and then scale out - which, even though it may be easier psychologically, imho it has a lower expectancy).
