The myth of letting your winners run

[SimpleMeLike]

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.

volpri,

Agree on the adjusting the PT due market dynamics (e.g., the market saying "screw your PT, I am the boss boy, I do what I wanna do, and you follow me" see the first 20 seconds of video on how the market talks to me. lol hahahah). The market is the master, and I am the slave.

"I am the boss motherfucker" LMFAO ....the market is the boss.

 

[deaddog]

Be careful, studies show that buying stocks making 52 week highs (or lows) will not give you a very significant trading edge.

Here is a backtest that proves it. The author concludes : "However, at the very least, we can come to the conclusion that there really isn’t an advantage to purchasing a stock based on the 52-week high or low."

https://www.equitieslab.com/buying-high-vs-buying-low/

See if you can find a backtest that buys new highs then manages the portfolio so that the portfolio never holds a loser and exits when a stock breaks it's trend line.

 

[Tradex]

and exits when a stock breaks it's trend line.

It's hard (if not impossible) to backtest a system based on "trendlines", a subjective concept by definition.

 

[deaddog]

It's hard (if not impossible) to backtest a system based on "trendlines", a subjective concept by definition.

True; I suppose you could use a moving average but the point is these studies that prove something doesn't work are usually based on holding for a specific period, not based on managing the portfolio. Exits are as important as the entries.

 

[Sprout]

It's hard (if not impossible) to backtest a system based on "trendlines", a subjective concept by definition.

Not if one gates and kills price based on volume. Annotating Trendlines can be logically derived using parallel lines, 3 pts and recognizing the market structure of nested fractals.

 

[Tradex]

Exits are as important as the entries.

I could not agree more my friend, and I will keep you posted if I find something.

That said, buying high and selling higher DOES work (and vice versa for short positions), no doubt about that.

In fact that's how legendary trader Nicolas Darvas made 2 million dollars, by buying stocks making new highs (what he called the "box"), as explained in his fantastic book "How I Made $2,000,000 in the Stock Market."

 

[Tradex]

Not if one gates and kills price based on volume. Annotating Trendlines can be logically derived using parallel lines, 3 pts and recognizing the market structure of nested fractals.

Of course, and we can also use regression lines.

But I like to keep things VERY simple, that's why I use pure price action and nothing else.
Buy (or sell short) and let your winners run until you see some evidence that the party is over.

That's it.

 

[SimpleMeLike]

It's hard (if not impossible) to backtest a system based on "trendlines", a subjective concept by definition.

yes, I agree.

Manual back testing the method to exit position at break of trendline will be too confusing.

Try the break and close of EMA one or two times as an exit method. That keeps my black ass simple.

 

[Tradex]

Try the break and close of EMA one or two times as an exit method.

After years of trading I discovered that this is still one the best ways to exit a winning position!

The added advantage is that the trader can still re-enter the position if the trend resumes.

Excellent comments man, you really did your homework!

 

[volpri]

Ok I took a break from the gardening. Boy is it hot out there. Decided to take an averaged down LONG trade in the NQ a few minutes ago. It was 6 contracts. Netted $780.00

Lock in those profits. BTW while at it I also took a few more trades in Mes and a couple straight scalps in ES.

All trades winners today.

Here are the charts or NQ

So far today All winners. Grab them profits. Cut them winners short and average down them losing positions. Wear that pistol backwards Eastwood. Got to get back to gardening.