Position Management - the Unfortunate Afterthought

[bone]

I’ve worked with hundreds of experienced traders the past 15 years in my consulting business. And for the overwhelming majority, during my first meetings with them it becomes readily apparent that they had always treated position management as an afterthought before they hired me.

Why is that?

 

[deaddog]

I’ve worked with hundreds of experienced traders the past 15 years in my consulting business. And for the overwhelming majority, during my first meetings with them it becomes readily apparent that they had always treated position management as an afterthought before they hired me.

Why is that?

What do you mean by position management?

 

[bone]

How much forethought and planning a trader puts into setting a profit target and the stop-loss. How disciplined is the trader in honoring the stop-loss. Position sizing - especially as it pertains to a period of successful trades or a rough patch. Does the trader scale into and out of positions?

There’s quite a bit to it in fact.

What do you mean by position management?

 

[SimpleMeLike]

Why is that?

Hello Bone,

Good question.

In my opinion the reasons are:

1. Traders and humans are not built for structured day to day working. Picking a stop loss and profit target is alot of work, compared to "ok, let me just get in and see what happens, hopefully I make some money"

2. Traders and humans do not like rules and regulations. Setting a stop loss and profit target is rules and regulations.

3. Traders do not trust their trading idea to take profit at X and exit at Y. When they enter the trade, they think "But I can make more money if put Y down some", "Is this stop right or wrong"

4. Traders want big money right now. "why should I risk 1% of my $10,000 account balance right now, man that is only $100, man that means I can only afford 2 shares of Apple, or I can not even trade the NQ full contract with this crappy $100, Fuck this 1% crap, I am betting $1000 on this trade so I can trade the full NQ contract, and Fuck going to MNQ for $2 a point, that is walmart money, I need to hit a big win to brag and show my friends and co workers what I did"

5. Traders do not understand performing trading in a consistency, structured manner, risk controlled manner every day for the next 2 years or XXX to X,XXX trades is their ONLY Edge. Even if the out come of the 2 years or XXX to X,XXXX trades is -XX,XXX They think "I want to make money now just like at my job or like the youtube traders are doing"

6. Traders do not know how to select and stop loss and profit target consistently.

7. Traders do not trust their stop loss and profit target consistently.

8. Once the account goes to drawdown the trader says "I am down $3000 from $10,000, if I just trade 5 NQ on this one trade, atleast I can get back to breakeven, and do not have to fuck with this silly 1% position bullshit" ,......'Oh, and forget this profit target, lets move it up some"

9. Traders do not want to study wins and losses, to see if profit target and stop loss is correct.

ok that is enough. FYI, I am one of those trader.

 

[deaddog]

How much forethought and planning a trader puts into setting a profit target and the stop-loss. How disciplined is the trader in honoring the stop-loss. Position sizing - especially as it pertains to a period of successful trades or a rough patch. Does the trader scale into and out of positions?

There’s quite a bit to it in fact.

In fairness you said experiened traders, not successful trader.
I doubt there are too many successful traders without some process for managing positions.
I too am surprised at the number of traders that feel they do not need a plan.
They follow Will Rogers; "Buy a stock and when it goes up sell it". No thought of when to sell it or what to do if it doesn't go up.

 

[bone]

It just seems like traders spend > 90% of their efforts on entry. I’ve read some here on ET proclaim that a proper entry negates the requirement for trade position management and that idea is ludicrous to me.

 

[qlai]

I’ve worked with hundreds of experienced traders the past 15 years in my consulting business. And for the overwhelming majority, during my first meetings with them it becomes readily apparent that they had always treated position management as an afterthought before they hired me.

Do you ask them what goals they are trying to achieve? Do you tell them if they are not realistic? Do they believe you?

 

[bone]

For what I personally do with clients - my position management is just as mechanical as the entry indicator package and it’s an integral and mandatory component of the trading system. We set our profit targets and stop-loss at the time of trade entry.

Do you ask them what goals they are trying to achieve? Do you tell them if they are not realistic? Do they believe you?

 

[mikeriley]

For what I personally do with clients - my position management is just as mechanical as the entry indicator package and it’s an integral and mandatory component of the trading system. We set our profit targets and stop-loss at the time of trade entry.

Suggestion: Using your present strategy for clients,
replace clients with your own money/trading accounts
and you might eventually reach a level where the need for
clients is nil.

 

[SimpleMeLike]

Suggestion: Using your present strategy for clients,
replace clients with your own money/trading accounts
and you might eventually reach a level where the need for
clients is nil.

Hello mikeriley,

I agree with you 1000% multiplied by another 1000%.

The ONLY way to teach someone how to make money trading, is to show them how to make money trading every day or over a series of the next XXX to X,XXX trades in real time with real money.

Any other way of trying to teach someone how to make money trading is gossip or marketing or just good conversation or just a good read or the most common way, bullshit.