The myth of letting your winners run

[deaddog]

"All things being equal" means the trader uses the same discipline in both cases, regardless of the size of the positions.

Yes it is psychologically harder to do, granted, but that's not the point.

I agree with you in theory.

Couple points though. Won't size move the market?

Doesn't trader psychology move the market? (Fear and Greed)

 

[Tradex]

Couple points though. Won't size move the market?

In the Forex, a 200 million position will probably move the EUR/USD a pip or two during the London/New-York session, so I wouldn't worry too much about size if I were you.

Doesn't trader psychology move the market? (Fear and Greed)

But we are precisely counting on fear and greed to move the market my friend, that's how trends start!

 

[guowei58]

trend following systems = let your profit run until it goes parabolic or breaks trend
mean reversion systems = take profit after reversion

you need a few big wins in a trend following system. you need to avoid those few big losses in a mean reversion system

 

[HolyGrailSeeker]

The reasoning is this...

If you take profit off when your target is reached? Why? Because alot of the time the market can go higher and it does. Do you buy back in if it consolidates and go higher?

I think profit should be taken off when there is a reversal which shows prices are going towards the downside at least temporarily.

Taking off profit will lead to consistent gains, lesser drawdowns but a shallower equity curve (also keep in mind partly because of more commissions involved).

Not taking off profit till reversal will lead to higher drawdowns, less consistent gains but a steeper equity curve and bigger account.

 

[volpri]

I am trying out a new technique (at least new to me) to avoid 95% of the weeding in my garden. You can view my before...yes before ...I tried a new technique. It is called putting down woven fabric. So here is the same area with the woven fabric put down. Then I burn holes in the fabric with a torch where I am going to plant seed. Throw in some epson salts ....mulch and a little bit of cow shit, Diatomaceous Earth,
Then cover it And watch it grow. Bye bye weeds. Bye bye weeding hoe...bye bye.

Here the butterbeans, peas, and okra have been planted and many are poking through the holes already. Just planted like Thursday or Friday I think it was. Maybe wed. The latter pic is okra planted 2 days ago and not yet poking through.

So now you see why I can’t stay in front of the computer all day. Gotta be doing other things too. Like today had to fix the plumbing under the kitchen sink. The wife forgot the drain pipe was leaking and she turned the water on and got the bottom of her new cabinets wet. Boy was she mad. I had to stop trading today and fix the plumbing myself. No time to wait for a lazy ass plumber to crawl his carcass over here to fix it. So sunday I am up under the house fixing the drain pipe fighting off the spiders and ahoping no dang timberback rattler shows up under there with me. Then today in the house fixing the leak under the sink Got her all fixed and now momma is happy as a lark. When duty calls boys we gotta jump. If momma ain’t happy nobody is happy. In spite of much of my day taken I still managed to do some trading. If I feel like it tomm I may post them in my journal. Had 2 or 3 losses but overall ended the day in profit. What do you guys think of my garden. Getting to old to be weeding.

 

[Overnight]

...

I have 2 different accounts, my main one for daytrading and short term swings, and this bitty one for longer time horizon swings.

And a second job. You were moonlighting yer sax skills back in the day in cartoons. That's where the phat cash came from.

 

[murray t turtle]

Don't just listen to the commandments blindly, understand them.
'letting your winners run' is specifically to be used in trending markets, long biased markets like S&P500.

%%
QQQ also/generally speaking.
Also that truth was discovered when commissions were much higher; still excellent guide in some markets/etfs/dividend etfs…………………………………………………………………………….....

 

[deaddog]

Also that truth was discovered when commissions were much higher; still excellent guide in some markets/etfs/dividend etfs…………………………………………………………………………….....

Those who sell early also state the myth "You can't go broke taking a profit"

And then there are those who claim "You don't have a loss until you sell"

 

[ironchef]

And then there are those who claim "You don't have a loss until you sell"

True. I keep a few GE shares I bought a few years ago at the then bargained price of $30 a share. I refuse to recognize a loss on those.

 

[Laissez Faire]

I had a 17 point profit come back to b/e yesterday. Had to shut down for the day after that.

I recognize the problem having had similar experiences myself.

If you look at how ES moves most of the time - it's very rare that it moves 20 points without a (significant) retrace.

If you're actually behind the computer and try to capture a big one - one way to deal with it is this:

Let's say you're swinging for a 30 point target and you're currently 20 points in the green off a swing low.

Bank those 20 points of profit. You now have 20 points profit or 'risk capital' if you will.

Re-enter at a lower price on the retrace if you still get a buy signal OR if you don't get that and momentum picks up - re-enter at a similar price to where you exited.

The outcome will probably always be better. Best case - you're re-entering 10 points lower and squeeze an extra 10 points out of your original 30 point target for a total of 40 points instead.