How do you guys combat FOMO and take profits when should

[HolyGrailSeeker]

Hey guys,

I have this problem where I enter a trade with a profit target in mind. Now for some reason the stock reaches a point where it looks like it won't move my way anymore and so I have to get out and take my profits. For some reason though, I don't do that as I fear taking profits and having the stock just moving my way again and missing out on big gains.

Did any of you ever faced that, and how do you combat it?

Stocks or cryptos or anything for that matter are just like a rubber band. They snap back to mean reversion. If the price is overextended, unless you are watching it like a hawk where you can ride it to its fullest, its better to sell and wait for a better entry.

 

[SimpleMeLike]

I don't want to sit here and give you advice such as "be more disciplined" because that is the advice that paper trader resort to. Instead, keep stats on the times that you exit according to plan and when you not. When the sample is large enough and you see the numbers it does knock sense into you. Stats don't lie, Intuition cannot be quantified and it's a self liar ( to one self).

MattZ,

Good post. May I please have your opinion or feed back.

There are 3 trade management methods using stop loss trail orders I have been thinking of using when I trade one setup.

I need to pick 1 of the 3.

Would recommend me back test all 3 methods to see which methods provides the most profit and go with that method?

Should everything be quantified/proven to make money rather discretionary or mechanical trading ?

Thank you.

 

[3acor]

Hello 3acor,

Yes, you asked a good question. I face the same challenge.

It all relates around repeatable trade managment strucutre of each trade. So lets discuss challenege, solutions, disadvangte, and advantage, testing.

I combat it with how I want to trade. It is a personal thing. Some people trail stop a winner until profit target is reached, some people do not use profit targets, and just trail stop the winner.

Challenege:
1. Do I wait for my pre defined profit target to close trade?
2. Or do I exit when I feel like stock price will not reach my profit target?

Solutions:
Option 1: Wait for your profit target to hit.
Option 2: As stock price moves towards your profit target, adjust your stop loss to lock in profits.


Advanagtes:
Options 1: less stress, less worry, set and forget it, free your time. No need to watch the chart repeatedly, go back to full time job, etc.
Options 2: You lock in profits as price reaches your target.

Disadvanagtes:
Options 1:stock price can come within $0.01 (1 cent) of your profit target and reverse on you. You take a loss instead of a win. Now you are pissed off for days. Your profit targets better be right.
Options 2: There will be times when you don't get all your profits.

Testing:
1. For 50-100 trades try both option 1 and 2. Research 3 ways you want to use trail stops (price action methods, dollar value method, indicator method) During testing phase your will discover the challenges of options 1 and 2.

My conlcusion (fyi, i make no money trading, still trader in the trenches on my journey to sucess) is:

Do what you have time to do.
Do what you comfortable with doing.
Do what testing results tell you to do.

I am in the same position as you. I have no choice but to test each options. However, I personally like the trailing stop method. The problem with that is finding one trailing stop method and sticking with it.

I see what you mean. I feel also that we (at least me) don't take profits not just to miss out on the potential gains but also on being able and wanting to catch the whole move.

A good solution would be that if we are up a decent amount and feel the trade isn't moving our way anymore, just get out 70-80% and let the rest ride.

That way, we guarantee profits and if the stock keep moving our way, we can try and catch the whole move with the 20-30% left. Worst case, we get out at break-even.

 

[MattZ]

MattZ,

Good post. May I please have your opinion or feed back.

There are 3 trade management methods using stop loss trail orders I have been thinking of using when I trade one setup.

I need to pick 1 of the 3.

Would recommend me back test all 3 methods to see which methods provides the most profit and go with that method?

Should everything be quantified/proven to make money rather discretionary or mechanical trading ?

Thank you.

You are making too many assumptions. The first one is that your method could adopt trailing stops, and that is not true for all methods. In fact, for most beginner day traders and scalpers, I find that placing targets may be more efficient.

The second is the ability to backtest trailing methods. You must know whether it hit the Bid, the Offer or you are using the last price.

Should everything be quantified? Again, you should at the very least run a method that has positive expectancy. Even if you are using discretionary based decision they have to based on some logic that makes sense to the volatility of that market.

You can go on and on backtesting and retesting, but nothing will give you as much insight as real-time trading.
I see some degree of under-appreciation of what actual screen time does and instead focus on "watching" the market as if an intuitive divine will inspire them. Real-time trading has a cost, and initially, it is very hard. But, trying to avoid error via a hypothetical model could only help that much.

 

[SteveH]

OP,

You should be keeping detailed stats on the max heat and gain every trade signal in your system took, regardless of where you actually exited. For volatility reasons, it's good enough to keep active stats for the past 20 trading sessions on a rolling basis.

The more you know your numbers, the less clueless you'll be.

 

[SimpleMeLike]

You are making too many assumptions. The first one is that your method could adopt trailing stops, and that is not true for all methods. In fact, for most beginner day traders and scalpers, I find that placing targets may be more efficient.

Thanks MattZ,

You make an excellent logical comment. So I am forcing trailing stop on my method rather than also evaluating if my method is more profitable for fixed targets.

I have been evaulating both:Trailing stops and fixed targets (then re enter with trend).

While trading the fixed target method, I have noticed that stress levels are down, comfort is up, less decision making, I feel I did something right, I feel I made a good trade.

The psycological part comes after the trade when I think "wow, I just risk 20 ticks to only make 10 ticks, what happen if you only trailed the winner for bigger rewards". The risk vs reward varies with changing day to day market conditioins. The logical thinking part comes in as "you exited for a profit, good work, lets get ready for another trade oppurtunity"

It is a back and forward roller coaster of what is best. So yes I evaluate and record stats on both methods, Fixed and trailing stops. I feel this is the only way to build confidence in what I am doing, so trading because more logical statiscal based rather than "oh, I guess this will make more money, lets just do it and see" This type of thinking leads to roller coaster emotionally thinking all day.

You can go on and on backtesting and retesting, but nothing will give you as much insight as real-time trading.
I see some degree of under-appreciation of what actual screen time does and instead focus on "watching" the market as if an intuitive divine will inspire them. Real-time trading has a cost, and initially, it is very hard. But, trying to avoid error via a hypothetical model could only help that much.

Yes, I agree. Real time and back testing is good. I personally spend more time in real time screen watching cause real emotions is in the game, real actions.

 

[3acor]

OP,

You should be keeping detailed stats on the max heat and gain every trade signal in your system took, regardless of where you actually exited. For volatility reasons, it's good enough to keep active stats for the past 20 trading sessions on a rolling basis.

The more you know your numbers, the less clueless you'll be.

Thanks

 

[MattZ]

Real time and back testing is good. I personally spend more time in real time screen watching cause real emotions is in the game, real actions.

Watching real-time quotes does not prepare you for the markets. You will learn more from one week of trading real funds than watching the screen for 5 years.

 

[murray t turtle]

Watching real-time quotes does not prepare you for the markets. You will learn more from one week of trading real funds than watching the screen for 5 years.

%%
That;
+ since most hedge funds[not all]lose money. He may want to study + record monthly..... trends- If he[original poster] wants to make money.As far as if he just wants to be an action addict- he may simply want to watch closing prices + closing prices on a 5 minute charts .These comments dont apply to crypto, or tulips; just stocks/ETFs+ stock/ETF trends.

BUT WSJ did do an interesting article-bitcon losses maybe tax deductible.