Holding on to winners and cutting losers

A

arzoo

Over the years, i've learned that holding on the winners and cutting losers at a reasonable level is one of the best ways to improve profitability.

I've been trying to improve my ability on this but have hit a wall. I havent really been able to get to a level where i can comfortably say that when the market mkes a good sized run, i can, on a good percentage of a time, grab a decent chunk of the run.

I know there are a lot of successful traders here who definitely do this very well. I was hoping that some would be willing to share their methods on how they implement their strategies on imrpoving this and if there were excercises/drills they went through when they were starting out to get them where they are with regards to holidng on to winners and stopping losers well.

thanks.
 
let me get this straight

you registered in 2002 presumably even then you were interested in making money off market

why else would you come to ET

and now in 2007 you haven't got the basics

please give up, or get serious

pick one and pick it soon :cool:
 
I've been doing okay. It's just i'm always looking for ways to improve my trading.

The last 3 years, i've been able to increase profitability by increasing contract size more than increasing profit per contract traded, and i've noticed that the latter is really better than increasing win-loss % or using contract size (which increases risk) on a 'pound per pound' basis.

I would like figure out how to imrpove trading with certain amount of capital only , since i've been investing the gains in trading from the last 3 years in real estate outside the US, but still enjoy trading and would like to see good improvement even if i put a cap on capital used (which wont really work with the current methodology i use).
 
Quote from madrid9:

let me get this straight

you registered in 2002 presumably even then you were interested in making money off market

why else would you come to ET

and now in 2007 you haven't got the basics

please give up, or get serious

pick one and pick it soon :cool:
More...

Yeah madrid, instead he should pretend like he knows what he's talking about and blather on and on showing how little of a life he has! Wow, you've once again continued to exhibit how much of a loser you are!

Congrats loser!
 
First step is to always assume the new position is a loser until proven otherwise. In which case the goal is to lose as little money as possible on the failed attempt. It's the mistake of falling in love with an unproven new trade that causes all sorts of basic trade management mistakes.

Occasionally (randomly) a genuine winner will hit, this is the only trade worth my continued time and effort. With a proven winner, I always assume it will run further than I think it can. It is surprising how often this assumption is proven true by the market.
 
It's simply a matter of improving one's timing, if you are often making entries at prices that aren't key reversal/breakout points (relative to your time frame), you will have difficulty cutting losers and holding winners. The better your entry, the easier it gets.

The psychological excuse is just an after-effect I think, and a matter of habit and experience.
 
Quote from illiquid:

The better your entry, the easier it gets.

The psychological excuse is just an after-effect I think, and a matter of habit and experience.
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Oh, WOW, how important this is, but how hard it is to learn your good entries. Example: I've been fading break-outs above/below either important highs/lows or prior important reversal points....and natch, getting burnt. However, good stop loss placement kept my losses to a minimum. Today, made the same fade, and viola, it was a "perfect" entry....100% efficiency, no drawdown, none....went on for a huge winner. So, the question remains, is this a good entry technique ? Dunno....had I not used good stops on the prior losing trades, IT WOULD BE TERRIBLE. So, interestingly, the money management aspect becomes part of the success of the entry.
 
Quote from syswizard:

Oh, WOW, how important this is, but how hard it is to learn your good entries. Example: I've been fading break-outs above/below either important highs/lows or prior important reversal points....and natch, getting burnt. However, good stop loss placement kept my losses to a minimum. Today, made the same fade, and viola, it was a "perfect" entry....100% efficiency, no drawdown, none....went on for a huge winner. So, the question remains, is this a good entry technique ? Dunno....had I not used good stops on the prior losing trades, IT WOULD BE TERRIBLE. So, interestingly, the money management aspect becomes part of the success of the entry.
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Yes definitely, you would not survive to improve on entries if you do not employ good money management. But I think again the two go together, you would not be able to employ stops which "kept your losses to a minimum" if you did not consistently choose entry points which provided good r/r ratios. It is alot easier to hold a winner if you could quickly move your stop to breakeven without it being touched, while cutting losers quickly also implies that your method can be proven wrong with a relatively low # of ticks against you.

When I said "simply" I meant it as "plain" and not "easy". It's definitely not easy, it's basically the whole ball of wax.
 
In a preponderance of my losing trades with the "fade" entry, the max losses were 3 to 4 times the loss taken with the stop order. Reason: when the break-out does occur, it is fast and furious !
 
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