Managing winners

[traderjoe999]

Hello,

I understand the conventional wisdom of "letting the winner run and cut the losers". However, this strategy seems to be creating my largest losses. There are so many instances where I have a nice paper profit but was too greedy to exit which resulted a reversal and net loss. I lost 16% of my account in October when scalping on Tesla (terrible mistake by going too big and used too volatile underlying). I've since regained 95% of my losses through selling covered calls, short premiums (TastyTrade), long stocks, and futures scalping. I've since then switched to managing winners by taking profits early, and the result is better.

There were several cases where I exited too early like the recent 1% pop in /NQ and big rally in /CL. I'm at peace with it though because these are low probability moves.

Does anyone practice managing their winners by taking profit early?

 

[mbondy]

Scale in, scale out, no regrets.

 

[lawrence-lugar]

Does anyone practice managing their winners by taking profit early?

I would never take a profit early, just for the sake of simply securing and locking in that profit.

I always consider the collective, dynamic picture of things of when to take that profit or reversal.
Play against the chart and its tickling variables behind it, not the money you see on the surface or table.

Sip tea, it's calming and reflective.

 

[SimpleMeLike]

Hello,

I understand the conventional wisdom of "letting the winner run and cut the losers". However, this strategy seems to be creating my largest losses. There are so many instances where I have a nice paper profit but was too greedy to exit which resulted a reversal and net loss. I lost 16% of my account in October when scalping on Tesla (terrible mistake by going too big and used too volatile underlying). I've since regained 95% of my losses through selling covered calls, short premiums (TastyTrade), long stocks, and futures scalping. I've since then switched to managing winners by taking profits early, and the result is better.

There were several cases where I exited too early like the recent 1% pop in /NQ and big rally in /CL. I'm at peace with it though because these are low probability moves.

Does anyone practice managing their winners by taking profit early?

Hello traderjoe999,

Yes, we all have been there before. You see the green and think about "what if fall down, what about that loss I took yesterday, i really need this win". So we take trade early, celebrate, then price goes on to make way more money then the little profit you took.

There is no answer to the be problem, it all depends on what make sense to the trader and what works for the trader in the long run.

I personally, like big winner with reward vs risk greater then 2. So I have to wait a bit longer. I also like to trail a winner for bigger profits. Some traders like scalping for smaller profits. It depends on what works for the trader.

 

[traderjoe999]

Thanks. For those that like stay longer in the trade to make a bigger profit, what about the opportunity cost? Your capital is tied up to the trade.

For example, in the past two weeks, I had a notional value of turnover of 100 times of my equity. I was able to do this without taking crazy risks because I entered and exited positions frequently.

Lastly, hindsight is 20/20. How do you know if exiting early is a good or bad strategy?

 

[_eug_]

How do you know if exiting early is a good or bad strategy?

You will know when 1 loss wipes out a week of those small profits.

 

[fyretrading]

closing before 21DTE is more important than managing winners imo , but I do both .

scalping is a negative to zero sum game ur just making ur broker rich, you

 

[Visaria]

Hello,

I understand the conventional wisdom of "letting the winner run and cut the losers". However, this strategy seems to be creating my largest losses. There are so many instances where I have a nice paper profit but was too greedy to exit which resulted a reversal and net loss. I lost 16% of my account in October when scalping on Tesla (terrible mistake by going too big and used too volatile underlying). I've since regained 95% of my losses through selling covered calls, short premiums (TastyTrade), long stocks, and futures scalping. I've since then switched to managing winners by taking profits early, and the result is better.

There were several cases where I exited too early like the recent 1% pop in /NQ and big rally in /CL. I'm at peace with it though because these are low probability moves.

Does anyone practice managing their winners by taking profit early?

The low probability events are where u make all the money....the small winners and small losers tend to cancel each other out.

Some pointers....

Psychologically it feels wonderful to have loads of wins. But are u doing this for your self esteem or to make money?

Have criteria for adding size to winners and deducting size from losers.

Take profits/losses, go back in if warranted....there is no rule against it.

 

[traderjoe999]

The low probability events are where u make all the money....the small winners and small losers tend to cancel each other out.

Some pointers....

Psychologically it feels wonderful to have loads of wins. But are u doing this for your self esteem or to make money?

Have criteria for adding size to winners and deducting size from losers.

Take profits/losses, go back in if warranted....there is no rule against it.

Wouldn't this be similar to betting on lottery where you're banking on a low probability event with a huge payout?

 

[tomorton]

I trader long-term without TP's. The only time I take profits early is if my whole set of positions has generated such a large sum in unrealised gains that I can bank this as earnings for the whole month.

On an individual winning trade, a pyramid order is triggered to replicate the trade when it reaches profit equivalent to original risk, and I move the original trade's stop to b/e. A new pyramid order triggers at the same distance and the stops are moved ahead by the same points value and so on and so on without limit. So I never increase the capital risked but continually increase the unrealised gain risked: I don't mind risking winnings to make more of them and the r:r has the potential to go parabolic.