I'd say you are making two mistakes. One, you are sitting there passively, letting a ~15% profit go to b/e. The b/e stop is a great idea, but it is a failsafe, not the routine way to exit a trade. Two, any profit target is inherently arbitrary. Who are you to say the market will reach that point? Once you are in a trade, you have to be alert for signs that it is no longer working. That's when you exit, not when you get to b/e or your target.
Never let a profit turn into a loss. (Good or bad advice)?
- Thread starter gifropan
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I'd say you are making two mistakes. One, you are sitting there passively, letting a ~15% profit go to b/e. The b/e stop is a great idea, but it is a failsafe, not the routine way to exit a trade. Two, any profit target is inherently arbitrary. Who are you to say the market will reach that point? Once you are in a trade, you have to be alert for signs that it is no longer working. That's when you exit, not when you get to b/e or your target.
It's neither good nor bad advice, it's silly and meaningless advice.
Exits should be defined in the context of your strategy. Almost all losers will show gain at some point and most winners will show a loss at some point. I don't see why you'd want to trade the noise around the zero line.
Exits should be defined in the context of your strategy. Almost all losers will show gain at some point and most winners will show a loss at some point. I don't see why you'd want to trade the noise around the zero line.
First of all, rules dont' work 100% of the time. Therefore, when you say the following...
You need to sit down and statistically determine how often such does happen to determine if it merits a change in your trade management after entry. If it doesn't merit a change...leave it alone and learn to live with it when that situation happens again.
With that said, you can then do any of the following:
* 1 - Design a re-entry signal near the price your trailing stop if/when the trailing stop is hit.
* 2 - Learn to recognize and then take action (don't freeze like a deer in the road while staring at approaching headlights) when the price action is reversing prior to reaching your profit target so that you can exit early (prior) to the trailing stop is hit and then do *1.
* 3 - Set your trailing stops with scale outs.
Mark
Scaling out makes your broker richer. Let's say you trade 500 times/year on 100 positions. You scale in and out 5x per position. Over 100 positions, what does all of that scaling accomplish? Over your total portfolio, the scaling will simply cancel itself out.
As for the criticism of pyramiding -- that's why it works, because it's counterintuitive. If it were intuitive, everybody would be doing it, and it wouldn't work.
So you've entered at 37, it moves to 42, you go to about BE and it stops you out. What prevents you from re-entering when it hits 37 with your same stop? You liked it before at 37, so unless your analysis has changed, why not jump back in? You're basically back at square one and out 2 commissions, which is peanuts if your desired move materializes. If it happens a couple times, then perhaps you might want to wait for the next setup, but taking one or two extra shots might well be worth it.
Pyramiding is simply the inverse of doubling down. Doubling down doesn't work for the same reason pyramiding does, because trends tend to continue.