Holding onto Profits

H

huby

I've been having a problem with "dissapearing profits" lately. There were 3 or 4 days in the past 2 weeks that I was up significantly on the day (5-10% of my entire account), and was very tempted to call it a day. I of course didn't, and on only one occassion was I able to hold on to the profits. The other times I either gave most or all of the money back by the end of the day. Very frustrating. One day last week I was up over $1,100 net on the day and ended up finishing up $100! I was so pissed! I couldn't believe I flushed $1,000 down the toilet in a couple of hours.

What do you all do in these situations? I know some people quit trading all together when a profit target is hit, others reduce share size. Some even increase share size with the assumption that because they're on a roll, why not bet some of the markets money.

This is such a tough call to make IMO because it's hard not to get emotional. I recently read "Trading in the Zone" and I've been getting much better with my emotions during the day, but it's still very hard. I try to think of myself as a machine just doing a job. Making or losing doesn't really matter as long as I follow my rules. (Of course you have to have a positive expectancy system for this type of attitude).

My personality is prone to keep trading rather than quit. A setup is a setup. Why not take them all regardless of where my profits are at on the day? This has kind of been my thinking lately. The one good day I had where I was up significantly, I really wanted to quit when I was up $500. That's twice what my daily goal is. I kept trading and finished up $900. It felt great! But then of course there are the other times when you give it all back. What to do, what to do????

(Just so you know, on those days I gave the money back, nothing changed with my trading. Same share size, took the same types of setups, didn't think I was really doing anything different. Maybe I was subconsciously who knows).
 
Profit targets for price, for daily gain, and for the week.
They keep me sane. I daytrade off of daily bars entries so if no setups I won't trade for the day.

I then peel off positions since I trade countertrend and as the position moves further away from my entry price the more likely it will soon retrace (daily trend is other way) so I reduce my positions. This has made a huge impact on my trading this year.

rtharp
 
Rtharp,

For newer traders-if you are so inclined-you may want to elaborate on your last post as it has great implications but may not make sense to some....and I certainly don't want to put words in your mouth.
 
huby,

Making or losing doesn't really matter as long as I follow my rules. (Of course you have to have a positive expectancy system for this type of attitude).

Excellent realization that the individual trades don't matter, same as the individual hand of cards, roll of the dice, or spin of the wheel don't matter to the casinos. And your second point is critical and absolutely essential to the whole equation - just like the casinos must have a percentage edge in every game they offer to remain profitable, we must have a system with positive expectancy to remain profitable over the long haul. Otherwise you may occasionally have some nice runs, but overall you slowly bleed to death.
 
Ok I was asked to add so I will

Hopefully this comes out clear as my head isn't from drinking. (last night before I heard to Echo's Arizona office for awhile)


if it isn't I'll come back to it in a day or 2 and edit it when my head is clear.
First Huby

I have a clock from http://www.daytraderproducts.com/

I was actually thinking of mass producing these clocks. It shows the probability of different hours in the trading day by showing red, yellow and green on the clock. I repainted mine just a little bit as I disagree with the makers that the first 30 minutes are bad for trading. I make 80% of my profits in that timeframe.

It starts green for the first few hours, than turns yellow as market makers go to lunch, than red during lunch hours, yellow after some of the market makers come back, green during bond market close, yellow right afterwards and than green for the close.

Think of it as it is VERY dangerous to trade in the middle of the day. I look at the clock and if I enter positions in the middle of the day remind myself what that clock says.

It might be of use to you.


Ok now on my original post.

I've posted before on what I do for my trading signals.

All of those have profit targets. I sell when the general public is buying and buy when the general public is selling. This allows me to get out of big positions with ease.

I have a goal for each day of how much I am going to make. If I make this goal --I just pat myself on the back and take the rest of the day off. When I can hit this goal consistently for a few weeks in a row I raise it again.

I have a profit target for the week. I can sometimes make my weekly profit target in a day. This usually means take the next day off and relax. It's a reward for doing so well.

My profit targets give me something to shoot for that are realistic and keep my feet on the ground.

I daytrade off of daily bars. Yes I am a daytrader but my entry signals my first be confirmed in a daily chart before a one minute chart. The longer the timeframe the more reliable the trade. If I get no signals that I can't trade.


I also peel out of my positions. This is due to the public coming in and I usually have size that I don't wish to unload all at once. By having a smaller position as the move continues in my favor with profit locked in it allows me to feel comfortable giving the trade wiggle room.


Huby another thing take a look back in your journal (you should be keeping one )

are the majority of your trades made in the first hr, middle of day ,last hr??

Have you made money more often trading all day compared to stopping early on more often than not?
These are questions only you can answer but if you look into these can give you some insight about what your system is doing.

I'll come back to edit this when I sober.

rtharp
 
Nice post Robert.
I would consider applying your approach to my trading. It is balanced and evolutive.
This shows again that trading is not just entry, it is the management of the entire process on a long period of time (even when you hold trades for 30 seconds).
I like the quote 'I am a very short term trader for the long run'.
And for anyone learning (and I learn everyday) 'I walk slowly because I am in a hurry !'

neo
 
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