Help - I have discovered my archilles heel

W

womblevader

I'm into my second year of trading and have consistently traded with a high %age of winning trades but despite this I still have a real weakness.

Last night I was in 2 trades that both came close to hitting my profit targets, but then both reversed and I ended up using a variety of methods to turn a 2% winning position into a 5% drawdown.

But I realized that this had happened before so I went and analyzed drawdowns >1% over the past 3 months and all but 9/11 were from similar situations and accounted for a combined drawdown of 26%.

Does anyone have any advice on how to manage this:

I can think of a few things:
1. Trail a stop
2. Stick to original stop and target no matter what
3. Take the profit once you see the first sign of a reversal
4. Scale out over a couple of targets.

I would be interested in finding out how professional traders do this in the real world. This is the only situation that actually gives me stress when trading.

Thanks
 
Seriously though you should start looking at how scaling out would affect your p&L . A lot of posters on here are against it and they have some mathematical credence but at the end of the day if you can get some money in the tank it frees your mind up. I scale out while leaving a portion on that either hits a pretermined higher level or much more often let that piece go until it starts to lose momentum. With the second alternative sure you miss gettinmg some profits but on the flip side the big runs that occur should more than compensate.
 
Do you use pivots, fib projections, and what are you using for momentum ?

Can you read the market i.e.: pattern recognition H&S tops and
bottoms wedges

What are you using for triggers


I have videos that may help they are on You Tube

under ( tradepilotpro)

Plus I put pivots and targets for S&P every night for next day

I use the YEN as a trigger for globex you may want to look at that.


If you have any questions just PM me


Take Care,

Joe Baker
 
Here are a couple of tips:

P/L off until the trading day is over

Enter your stop first, then your entry

Use at least two targets, one is the target where you would move your stop to entry without risking a perfectly good trade and the other your final target.

Scaling out is inferior behavior from a monetary perspective, however, it gives you peace of mind.

Trading is a math game, risk vs reward, odds all the time, if you move your stop, you are screwing with the formula, particularly the risk variable, a big no no.

Incognito
 
Thanks for the quick feedback it has helped me a great deal already. I've got another winning trade under my belt.

Incognito - I agree its a maths/stats game, but I'm still working on the details. Eg consider the following trade..

Intitial
Stop 50
Entry 100
Target 150

Risk reward at entry 1:1

T=1
Stop 50
Mkt Price 125
Target 150

Risk reward now = 3:1 you would not take this bet so why would you want to stay in the trade with the current stop? To maintain a RR of 1:1 you would want to trail your stop to 100. Is this what you would do??

And the converse is true for the target.

Also the closer the price moves to the stop the more the RR goes in your favour. And we all know that this isn't the case.

Looking at the maths you can see why some traders want to close out early and also why some traders like to have wider stops than targets.

Obviously this is all counter intuitive and makes it hard for us poor traders [many of us even struggle with their spelling]

My view now is that if you are going for big targets you need to break the big target down into a number of smaller targets and trail your stop once you get past each target.

I now understand why I have been stressing out when the trades I have set with larger targets go against me.
 
Joe

I try to keep it simple and trade price action, momentum, and S/R. I dont use any indictors but do draw a few lines [usually horizontal] on the charts.

Strategies mainly:
1. Reversal ie a bounce off resistance [range or major]
2. Continuation from either pullback or congestion

Direction usually taken from steepness [momentum] of upslope vs downslope ie steeper moves the better.

Haven't had much luck with breakouts.

Targets and stops [now to be broken down more] are always meaningful with regard to support, resistance, and typical wave height.

I will change a trade if I see a change in momentum I dont like.

Don't use fib or trade H&S but do

Last 5 days have been 10 wins and 4 losses [3 of them last night, 2 went in the money shortly after closing out]. I dont keep stats anymore as last year I went for 3 month run of no losses and I refused to close out a trade at a loss to keep my meaningless record intact and it nearly wiped me out.

My short term trading goal is to eliminate the big drawdowns >1%....
 
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