scalp or hold on?

L

lescor

I have a dilema and this group seems like the best place to get advice. I started as a swing trader, but have been moving more to daytrading over the last few months. I've applied my basic swing trade strategy to daytrading with decent success. I basically buy breakouts and sell breakdowns out of congestion using only price and volume. I've also been concentrating on tape reading with listed stocks and am starting to get the hang of it and have had some nice wins just by watching bids and offers and thier size.

My question is what's the best way to exit? Especially when only reading the tape, I often am in a profit position quickly, but then I hold on looking for a trend to develop, when scalping for 20 cents would be best. But when I do hold on and the tape confirms I'm right, I get a nice win, which makes up for my small losses on close stops. Today it was TRI, which I shorted at 29 and held on for almost the whole sell-off, making almost $1.

So I guess my question is for those who trade a similar style. Do you take lots of small losses and make it all up on a big win or take lots of small wins and watch the big moves go without you? For me the pain of having been right, but getting out too soon is almost as bad as a loss.

Thanks,
Corey
 
Originally posted by lescor
I have a dilema and this group seems like the best place to get advice. I started as a swing trader, but have been moving more to daytrading over the last few months. I've applied my basic swing trade strategy to daytrading with decent success. I basically buy breakouts and sell breakdowns out of congestion using only price and volume. I've also been concentrating on tape reading with listed stocks and am starting to get the hang of it and have had some nice wins just by watching bids and offers and thier size.

My question is what's the best way to exit? Especially when only reading the tape, I often am in a profit position quickly, but then I hold on looking for a trend to develop, when scalping for 20 cents would be best. But when I do hold on and the tape confirms I'm right, I get a nice win, which makes up for my small losses on close stops. Today it was TRI, which I shorted at 29 and held on for almost the whole sell-off, making almost $1.

So I guess my question is for those who trade a similar style. Do you take lots of small losses and make it all up on a big win or take lots of small wins and watch the big moves go without you? For me the pain of having been right, but getting out too soon is almost as bad as a loss.

Thanks,
Corey
More...

The classic alternative is to put a scalp trade and a longer term trade on at the same time with same stop. Another way of saying this is to scale out of your trade in tranches, say 1/2 at scalp profit target, 1/2 a higher timeframe support/resistance.

Its not as profitable but it helps the psychology :)
 
Lescor..

i also trade breakouts.. although i generally stick to nasdaq stocks.. my usual strategy is to cover half my position when i have a small gain, maybe 25 cents or so.. and then hold the rest for a better price.. the exception being on narrow, choppy days.. then i find its best just to scalp.. also, i look a couple time frames up.. look for support/resistance that might halt the move.. determine the longer term trend.. and look at what the overall market is doing..

remember that our job as traders is not to buy the low and sell the high.. if you look at what happens to a stock after you exit and think about what if you had held, youll drive yourself nuts.. you arent really trading the stock so much as you are trading your system.. if you exit when your system says to exit then you didnt leave any money on the table..

-qwik
 
Qwik,

if you exit when your system says to exit then you didnt leave any money on the table...

As you often do, you hit the nail on the head again. Thanks for putting that little reminder so eloquently into words, it goes onto my monitor. I'd be lying if I said that I don't forget this truth, practically on a daily basis. :)
 
For every trader, leaving money on the table is a very common experience, personally I don't consider it money on the table if:

1) I captured 70% of the move
2) The position did a very very painful pullback that I wouldn't have been able to held on to begin with.
3) The position did nothing and went in my direction the way it was supposed to, a hour or two after I got out

As scalping versus holding, it depends on the situation. I think you should always be paring in and out of positions, taking profit on big spikes, adding more on dips, etc . . .

The taking many small hits and make it all back on a big hit doesn't work in a choppy market, simply because you can't get that big hit when you want it and all the small hits eats your confidence so when you do have a big hit you pass it up or get out too early.

Always be willing to take small profit when something doesn't feel right, if you are a good tape reader, you will recognize when a move feels real, and when it doesn't. If the move has no volume whatsoever and the broad market doesn't seem to support your reason behind the trade, just take the scalp and move on. If you are new to trading you should be focusing on high shooting percentage and small losses before you focus on letting the winners run, because honestly letting the winners run is a LOT harder than cutting losses, and it is something that will take a lot of experience to develop.

No pre-defined trailing stops work, every situation is different, take what the market give you, we ALL leave money on the table, focus on your entry point instead. If your entry point is good, you will be able to handle the shakeout's and wiggle's. This is why I don't play most breakout's on those days, you are almost guaranteed to get a pullback that's when you should be buying, not the first initial breakout.

Anyway, optimize your entry, the exit skills will take a long long time to develop.
 
Your position size should determine your exit. Smaller size allows for lots of wiggles. A bigger positions shouldn't be used for long term trades. If you have a set stop than your position size should be in relation to it.

Robert Tharp
 
MR LESCOR SPEAKING OF SWING TRADING,I LIKED ALL OF THOSE COMMENTS. HAVE YOU STUDIED THE ACTIVE VOLUME ELEPHANT SIZE NAS TEK STOCKS ---3 MONTHS,,,3O MINUTE 15 MINUTE ;5MINUTE CANDLECHARTS........STRONGEST UP TRENDS IVE SEEN ALL YEAR ENTRY AND EXIT AROUND MARS --MULTIPLE MOVING AVERAGES
 
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