The myth of letting your winners run

[Tradex]

I learn a lot with manual back testing.

Oh absolutely, when you backtest bar by bar your brain starts to see interesting (and hopefully profitable) price patterns that the computer will never be able to see or even notice.

 

[Sekiyo]

It’s not about letting winners run.
It’s about methodological entries and exits.

The principle is in the asymmetry.
Losers < Winners.

Don’t let your winners turn into losers,
Unless it’s actually profitable long term ?

 

[SimpleMeLike]

Oh absolutely, when you backtest bar by bar your brain starts to see interesting (and hopefully profitable) price patterns that the computer will never be able to see or even notice.

Tradex,

I am glad there is a manual backtester with me.

The one thing I learned about manual backtesting is make sure I know what I am testing for. It is a pain getting to trade 159 and saying "crap, I really should be testing for this and instead of that". lol

 

[Tradex]

It is a pain getting to trade 159 and saying "crap, I really should be testing for this and instead of that". lol

I hear you brother!

 

[volpri]

Nice to eat the fruits of one’s labor. Kinda like trading? Here are squash, zucchini, pickling cucumbers, potatoes from my garden. Wife is getting some ready for the freezer and I been eating some. Battered and fried. Mmm mm! Also fresh french fries Mmm so...so...tasty. Kinda like scalping.

 

[volpri]

You guys like my tomatoes and squash plants? We already harvested and ate our lettuce, and collard greens.

The tilled up area I will plant in peas and butter beans. Bought some butterbean seed today.

View attachment 229556

 

[Tradex]

Fresh, organic vegetables from your own garden, you lucky man.

 

[Tradex]

Don’t let your winners turn into losers,

Excellent point, as this is by far the hardest part : when to exit a winning position?

The trader can use a trailing stop, a simple moving average, a Fibonacci level (for example exit on a 50 or 68% pullback), a previous swing low (for long positions), a previous resistance level, a Parabolic Sar indicator, a 3 bar low, an average true range (ATR) indicator or a break of a trendline, to name a few.

But again, only the backtest can reveal the optimal exit strategy to use for maximum profit and minimal risk.

 

[deaddog]

I don't see the problem of letting winners run. As a trend follower I don't close a position until it breaks the trend.

I swing trade and have held some positions for years. I buy stocks that I hope will go up. If they continue to do so there is no reason to sell.

 

[volpri]

Excellent point, as this is by far the hardest part : when to exit a winning position?

The trader can use a trailing stop, a simple moving average, a Fibonacci level (for example exit on a 50 or 68% pullback), a previous swing low (for long positions), a previous resistance level, a Parabolic Sar indicator, a 3 bar low, an average true range (ATR) indicator or a break of a trendline, to name a few.

But again, only the backtest can reveal the optimal exit strategy to use for maximum profit and minimal risk.

I use The Traders Equation to structure my initial entry, SL, and PT then once I have the position on I am constantly monitoring it as the trade dynamically unfolds. Depending on the dynamics I may adjust my SL and PT.