Taking Profits - Question.

O

optionable

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Hi all...

Off late I have been having an awful run of taking profits too early. It seems like as soon as I take my profit the market runs in my favor for an much greater gain.

My question is how do you guys handle a situation like that? Do you look to revamp the strategy to try and capture as much of the move(s) as possible? or just accept that this is part of the job?

I hope it is the latter since I tend to keep my losses small relative to the gains on average (there is an occasional loss around the magnitude of an average gain).

However, a little part of me keeps recounting that 'they' say that a successfull trader must risk losing on the trade to '...let the profit run...'.

Please help :)
 
my motto is .."you can never go broke taking a profit"

who cares if the stock runs up more if you made money on it? someone makes & loses money on every stock every time it moves either up or down, you should be glad you were on the right side of the trade.

if I want to lock in profits I use a trailing stop loss.
If I have a lot of $ in that trade and want my stop loss large but dont want to risk all that then I'll sell 1/2 and put a trialing SL on the other 1/2

I like to have a plan before I enter. Here is what I am buying it for ..this is my max loss and here is where I take or start taking $ off the table.

It is much easier when you have it all planned out before hand. I trade with fildelity and use their "if" senerios .....if it hits this price then place this order..if it hits this price then place that order.
takes all the emotion out of it ...like that rotissery cooker on TV ...set it and forget it
 
For traders there is a meat thermometer equivalent in trading.

The OP mentioned it, unknowingly.

Lets say the OP examined part of his trading plan and found out what the entry rule set was.

He writes it on a few lines of a yellow pad.

Then he says I will use this twice as often as before.
It is the rotisserie/refrigerator plan so to speak.

I type it up in ET every two years without fail and it never catches on .

If a trader can figure out how to write a long entry plan on a yellow pad, he may be able to write out a short entry plan on the pad too.

If he has a four color ball point pen (we buy them by the hundreds to have our phone number on people's desks and in purses all the time). then he can switch colors and change the long words to short words on his yellow pad and have both entries written down.

Lets say after this suggestion is made every two years for six years, a person writes on a yellow pad.

What he sees is that an entry for a long is an exit for a short. He also sees an entry for a short is an exit for a long.

He may see, then how to hold a long until an entry for a short arrives. Then he might hold that short until an entry for a long arrives.

He just sits there and makes money all of the time. He NEVER looks for an EXIT. He just looks for two kinds of ENTRIES which is twice as simple as looking for two different things and being out of the market half the time.

Fifth graders LOVE to do this. Why? Because to them it is a game.

What do their parents think? The parents cannot understand this at all and tell the kids to not do it. The kids talk to each other and they find out that a couple of MOTHERS understand it and think it is neat. FATHERS do not understand it. Why? The reason is simple it makes them look very dumb because of all the trading they have been doing that is like how the OP trades.

Fifth graders would rather trade than do anything else including lunch and gym. But we all know they are not fucking each other all the time as yet so they make different kinds of choices than people who have been fucked al the time of are getting fucked by others all the time.

The rotisserie/refrigerator approach is anything but set it and forget it. It is the way to learn to hold to make the profits in each profit segment.

What is the name of making all the profits in each segment?

It is called volume action trading. Volume action trading will become really popular when people find out Price Action trading is a lagging approach to trading. Ask any rotisserie.

Just before the OP's entry which he fails to hold out of fear, anxiety and anger, is the signal that comes just before the entry signal he is using. It, of course, is the pre entry volume action signal.

Volume action is also done on a yellow pad but on page 2 of the pad. You have to turn the page so you don't see the words on page one. They are the same words but for volume instead of price. And now you know why we give away four color pens.
 
Hey Jack,

I'm not sure if I get your reply.

I think you are saying that a way to stay in the market at all times is the deal way to trade? Please correct me if I am off with that assessment.

Also, I am trying to catch the move after a retracement and exit when it looks like it 'might' consolidate or breaks against my position. Is this okay or is there a glaring error in looking at it this way. FYI, I am an intraday trader...if it helps to tailor your response.

Thanks in advance.
 
Quote from optionable:

Hey Jack,

I'm not sure if I get your reply.

I think you are saying that a way to stay in the market at all times is the deal way to trade? Please correct me if I am off with that assessment.

Also, I am trying to catch the move after a retracement and exit when it looks like it 'might' consolidate or breaks against my position. Is this okay or is there a glaring error in looking at it this way. FYI, I am an intraday trader...if it helps to tailor your response.

Thanks in advance.
More...

Many vendors promote catching moves after retracements.

Oliver Velez is a good example.

He uses a 20 and a 40 ma price ma set to prove his point. Getting a universe where this applies is difficult to do however.

For index intraday trading it would be the same only speeded up.

What you are doing is trading inside a channel using traverses that are dominant traverses of the channel.

You are out of the market a lot of the time.

so for you the slope of a channel makes a lot of difference. A steep one has little or no retrace.

A flat channel works for you and you are in a little over half the time because of the fact that retraces happen faster than advances (dominant traverses)

For gently sloped channels the retrace is small and the advance is large.

In all cases, the volume is a nice leading indicator.

you are sidelined as volume decreases. when volume is in the trough you are getting ready to enter. after the trough of volume you enter and you exit well before the peaking volume.

This is because dominant traverses which you trade have pauses on temporarily lighter volume. The common internal patterns do not occur on these pauses.

Retraces which you sit through on the sidelines contain a lot of the common price action patterns. As is well known a lot of these patterns are followed by the failure of the patterns to work.

So what happens is people get to where you are.
first you do not trust a retrace ending. It may be just a nondominant pattern in Price Action that subsequntly fails on lower volume than the end of the original pattern.

A way to trade to make money all the time is to take price off the chart and just use volume and indicators. But most people cannot use the "condition" of a market to trade this way. Most people need signals to "DO" things.

Being vey successful in trading is the opposite of what people condition themselves to oreint to.

For you, the retrace is over when volume hits a fairly low value. You hold until a high peaking volume has been reached, then you sideline and wait for another set up.

For some people it is possible to know how to trade the peak by reversing and then holding until the RTL (right trend line) is reached and then making the judgement if a retrace has ended or a reversal is continuing through the RTL.

This decision is made by using volume as a leading indicator of price on the RTL. Following the market during this moment is tough for most people because they do not know the difference between a retrace and a reversal.

I didn't go through spending many hours to learn to trade simply because I used a reasoning process instead of 10,000 hours as others advocate.

A shortcut to learning how to stay on the right side of the market is an easy one. It certainly gets you past entry/exit trading quite rapidly.

Look at volume as hiking up and down hills. As you hike you take profit segments. An uphill segment is in the dominant direction of the market. A downhill hike is in the non dominant direction of the market.

Indicators tell you which direction the market is going in as you do the hiking. Good signals from indicators lead price.


Some people say indicators lag price. For them indicators do lag price. They are using the wrong signals and do not know they are using the wrong signals. these kinds of people have two things to learn. It is very difficult for a person who is wrong in two ways to learn two things to be correct instead of being wrong. We have to let them keep being wrong and pissed off.

You may be approaching a time in your trading life when you give up doing entry/exit trading. All vendors do entry/exit trading and they do it because they do not know any better since when they left active trading.

All quants do entry/exit trading. they do not know any better either.

You may notice some day that making money has to do with "staying on the right side of the market." This is not done with entry/exit trading.

hiking up and down hills is quite easy because you follow the trail labelled "staying on the right side of the market" trail signs.
 
Quote from optionable:

Hi all...

Off late I have been having an awful run of taking profits too early. It seems like as soon as I take my profit the market runs in my favor for an much greater gain.

My question is how do you guys handle a situation like that? Do you look to revamp the strategy to try and capture as much of the move(s) as possible? or just accept that this is part of the job?

I hope it is the latter since I tend to keep my losses small relative to the gains on average (there is an occasional loss around the magnitude of an average gain).

However, a little part of me keeps recounting that 'they' say that a successfull trader must risk losing on the trade to '...let the profit run...'.

Please help :)
More...
I usually open several trades with different target profits. e.g:
TP = 2%
TP = 5%
TP = 10%

Then I'm using the following rules:
1. Use trailing stops.
2. Consider closing some trades when share is overbought/oversold
3. Consider closing some trades when share has reached strong s/r level.
 
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