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How do I get over wanting to "hit home runs?"
- Thread starter IronFist
- Start date
I would agree with most of what has been said so far. I don't know the level of where you are at with your trading but judging by your post I believe you have a long way to go. However, I do recall a quote from Marty Schwartz in the first Market Wizards book. He said he still had trouble staying in the trade and leaving money on the table. As I recall, he said every time he was up on a position, he would hear the cash register ring and would feel compelled to close it out.
The point is, even successful traders like Schwartz struggle with the same thing. Eventually, you'll find your way.
The point is, even successful traders like Schwartz struggle with the same thing. Eventually, you'll find your way.
Quote from osorico:
Actually, you haven't given enough detail to provide a truly useful "answer" FOR YOU. Therefore what Tums said is accurate... you don't know what the FK you're doing. I call it video-game trading.
What other detail do you need?
As a generalized rule, it is usually easier to adjust the identified "how" of a trade upwards: scalp into swing into position as opposed to the inverse.
Trailing/adjusting stops?
a
{
Say you have a setup, x. Sometimes x yields 50 ticks, sometimes x yields 10 ticks and then turns into a loser, sometimes x yields 10 ticks, goes back down to 5 or 1 or -1 and then goes up to 50 ticks, and sometimes x yields 1 or 0 ticks and then turns into -10 or -20 ticks.
}
Obviously x doesn't result in a straight shot to the target. In many cases, after x occurs, price goes 2-5 or more ticks AGAINST you before eventually ending up in one of the outcomes, a, above.
Is there a best algorithm for dealing with that situation?
Quote from rally64:
I would agree with most of what has been said so far. I don't know the level of where you are at with your trading but judging by your post I believe you have a long way to go. However, I do recall a quote from Marty Schwartz in the first Market Wizards book. He said he still had trouble staying in the trade and leaving money on the table. As I recall, he said every time he was up on a position, he would hear the cash register ring and would feel compelled to close it out.
The point is, even successful traders like Schwartz struggle with the same thing. Eventually, you'll find your way.
I'm reading his book, "Pit Bull," right now. I do kind of like his reasons for explaining why he's a scalper. He said he's not one of those people who is content being right 3 or 4 times out of 10 (when those 3 or 4 wins more than make up for the 6 or 7 losses); he has to be right 7 or 8 times out of 10 (for smaller profits per trade).
Pit Bull is a great book and written by someone that has some real experience, but it's not a guide to trading success. In fact, if you read his interview for the book Market Wizards, there are some disparities (how much did he lose in 87?). In addition, where is this guy now? Great trader that nobody has heard of in 20 years?
As for hitting home runs, that's a dilemma we all face. When do you cut your losses, how far you let your winners run?
Depends on the market and your timeframe. If you're going to be flat at the end of the day, you want to focus on intraday charts like 15 and 30 minutes. How wide are the bars on those charts and, given your timeframes, how big of a move can you realistically expect? Sure, there are going to be big moves, but is that the rule or the exception?
that's my question. I focus on the average moves for my time frames, which is 45 minutes or less. I time stop myself out of the trade after that. if it seems that a big move is in the making, I use trailing stops and try to let it ride.
but, I certainly share in your frustration here. But, if it was easy, we'd all be rich, right?
As for hitting home runs, that's a dilemma we all face. When do you cut your losses, how far you let your winners run?
Depends on the market and your timeframe. If you're going to be flat at the end of the day, you want to focus on intraday charts like 15 and 30 minutes. How wide are the bars on those charts and, given your timeframes, how big of a move can you realistically expect? Sure, there are going to be big moves, but is that the rule or the exception?
that's my question. I focus on the average moves for my time frames, which is 45 minutes or less. I time stop myself out of the trade after that. if it seems that a big move is in the making, I use trailing stops and try to let it ride.
but, I certainly share in your frustration here. But, if it was easy, we'd all be rich, right?
Quote from IronFist:
That's exactly what I'm planning on doing. I have every trade for the last month in an Excel document already.
You will find this works quite well. Unfortunately, many replies you are getting are based on gut feeling, not statistics.
Here is what I would do in Excel
#1 -- enter this data for all trades [these are the column headings]
TRADE Final-Profit Max-Fav-Excursion (MFE)
#2 -- Sort on MFE
#3 -- Make more columns: (for example: $750, $800, $850, etc. until you reach the highest MFE). Pick whatever intervals that help
#4 -- copy the Final-profit column value to ALL your first $750, $80, ... columns
So for example, it might look like this:
TRADE Final-Profit MFE $650 $700 $750
Mar17 SN8 $490 $1350 $490 $490 $490
Jun21 IBM $275 $1292 $275 $275 $275
Apr 7 ESM8 $832 $1268 $832 $832 $832
....
Aug30 ESU8 $27 $582 $27 $27 $-27
Dec22 IBM $-203 $502 $-203 $-203 $-203
etc.
#5 - for each $$ column, put that heading value in every place, where the MFE exceeded that column
So for example, it might look like this:
TRADE Final-Profit MFE $650 $700 $750
Mar17 SN8 $490 $1350 $650 $700 $750
Jun21 IBM $275 $1292 $650 $700 $750
Apr 7 ESM8 $832 $1268 $650 $700 $750
....
Aug30 ESU8 $27 $582 $27 $27 $-27
Dec22 IBM $-203 $502 $-203 $-203 $-203
I think you get the idea. Then you can take averages or sums on each $$ column to see which performs better...
Quote from IronFist:
Every time I cut a profit early it turns into what would've been a 40-50+ tick monster trade.
Every time I hold out for more, my 10 tick profit turns into a loss.
That seems pretty normal.
Let's assume your first case is a long position; whatever factors that are getting you to sell out "early" (in retrospect) are the same factors that are luring others into selling/shorting the move. This will amplify the trend higher as they collectively discover they are wrong.
The second case is just the inverse; the conditions all look and feel like a possible home-run, not just to you, but to everyone else taking the same position. So the vulnerability of price is in the move opposite to what all the "semi-pros" feel, that is par for the course.
As others have indicated somewhat more bluntly, when you don't know the situation and the correct response, you really don't deserve any profit, let alone a home run. You may have enough experience and/or tools to save yourself from making big mistakes, but knowing what not to do doesn't necessarily translate into knowing what to do. You can go about analyzing your own trade results and trying to find some "happy medium" of performance (just closing half and letting the other half run etc) but I'm not sure if that's really the best way to move forwards.
it helps if you know where the market your trading has resistance and support,fri the es had a trendline from oct highs to 6/22 that came in around 1323,if you were aware of that and noticed the djtrans,ym and naz selling off hard and they had similar distant support zones you would have stayed short until that point, when you noticed the es and the rest of these markets only bounced 5 points after selling off 19 and the dvol line on a comparison chart was going straight up while the uvol line just went sideways,that indicates a trend day, you would be looking for the next res line below 1323,i bought puts in google looking for a support line at 547.5,at 11:30 central i sold smaller puts against them to lock in a spread that gave me some room to the upside before taking a loss,when the es started back down under 23 i took off the protection and closed out my puts when google reached the target. Simple trade and simple data. It is easier to stay in a trade if you can see the forest thru the trees,perhaps you need more data,your original post didn't give any info other than u were in a trade
IronFist, your question is a good one and has to be dealt with by every trader. Fwiw here is my thinking on it. Let me say right up front that I have been trading seriously for six years now and only in the last few months have I come to the point of actually being consistently profitable.
First, I don't think it is possible to get away from the desire to hit the home run. Everybody wants the hero trade. But over time you have to learn to focus on trading well. Swinging for the fences is not trading well and when it costs you enough trying it will force you to rethink.
Just for the sake of discussion let's define a home run as 50 ticks. Let's further stipulate that any given day will have 10 trading opportunities that fit your criteria. Out of the 10 trades how many times can you realistically expect a 50 tick move? Really, it may be 0. But out of the 10 trades how many will generate a 6 tick move. Maybe all of them. If you focus on capturing and are willing to accept the six ticks haven't you just had a home run by taking the base hits?
After a month of taking the base hits you will have generated a string of winning days. When you get your brokerage statement there is no bonus for taking large moves out of the market, you just get the net profits from your winners minus your losers and comms. The important thing now is that you have clearly demonstrated that you have an edge of some kind. Now leverage becomes your friend. Add a contract and take your customary 6 ticks on one contract. You now have the luxury of holding for the larger move . How you manage that second half can make a big difference. It is entirely possible that the market will take back all of your 6 ticks and more. Whether you scratch the second half at entry or hold it into a small loss for a net scratch on the entire trade depends on how confident you are that a larger trade is available to you. The point is that you are accepting what the market will give you during the timeframe of your trade. Don't let winners turn into losers. Learn to love a scratch. (Easy to say, hard to do. But it is a must).
Also, while training yourself to de-emphasize trying for the home run have your plan for the day ready BEFORE THE MARKET OPENS. You will have some idea of where larger trades might happen and if the day develops a set up that has some potential you will be mentally prepared to take a shot.
Take the smaller trades and at the end of the month you will have some big ones in the mix as well. Hope this helps.
First, I don't think it is possible to get away from the desire to hit the home run. Everybody wants the hero trade. But over time you have to learn to focus on trading well. Swinging for the fences is not trading well and when it costs you enough trying it will force you to rethink.
Just for the sake of discussion let's define a home run as 50 ticks. Let's further stipulate that any given day will have 10 trading opportunities that fit your criteria. Out of the 10 trades how many times can you realistically expect a 50 tick move? Really, it may be 0. But out of the 10 trades how many will generate a 6 tick move. Maybe all of them. If you focus on capturing and are willing to accept the six ticks haven't you just had a home run by taking the base hits?
After a month of taking the base hits you will have generated a string of winning days. When you get your brokerage statement there is no bonus for taking large moves out of the market, you just get the net profits from your winners minus your losers and comms. The important thing now is that you have clearly demonstrated that you have an edge of some kind. Now leverage becomes your friend. Add a contract and take your customary 6 ticks on one contract. You now have the luxury of holding for the larger move . How you manage that second half can make a big difference. It is entirely possible that the market will take back all of your 6 ticks and more. Whether you scratch the second half at entry or hold it into a small loss for a net scratch on the entire trade depends on how confident you are that a larger trade is available to you. The point is that you are accepting what the market will give you during the timeframe of your trade. Don't let winners turn into losers. Learn to love a scratch. (Easy to say, hard to do. But it is a must).
Also, while training yourself to de-emphasize trying for the home run have your plan for the day ready BEFORE THE MARKET OPENS. You will have some idea of where larger trades might happen and if the day develops a set up that has some potential you will be mentally prepared to take a shot.
Take the smaller trades and at the end of the month you will have some big ones in the mix as well. Hope this helps.