The myth of letting your winners run

[themickey]

Ok. Here's a test.

You're a trend follower who believes in letting positions run.

A stock you hold jumps 50% in a day. You obviously would hold and trail a stop loss.

Question is, if you were new to that stock, would you buy at the 50% jump? If not, why not?

I bought a new stock position yesterday after a 245% jump.
ASX Moonshots

 

[GotherL]

The issue is distinguishing between a winner or something that just dumps or dips so much you can no longer justify holding it. Those situations happen so many times they instill a fear in you to take profit while you can.

 

[Overnight]

...

anytime I feel euphoria, I trim my holdings hard.

Oooh, I like that. Gotta' remember that mindful observation if I see it in myself.

 

[murray t turtle]

Ok. Here's a test.

You're a trend follower who believes in letting positions run.

A stock you hold jumps 50% in a day. You obviously would hold and trail a stop loss.

Question is, if you were new to that stock, would you buy at the 50% jump? If not, why not?

%%
Tough question.
NO\ but i dont do single stocks anymore 5% gap up all the time can BE A GOOD deal sometimes.WHY; i dont do single stocks anymore/LOL.
And thats why many let the profits ride. Some thing new i most likely would watch it for 50 or 55 days+++++++

 

[deaddog]

Ok. Here's a test.

You're a trend follower who believes in letting positions run.

A stock you hold jumps 50% in a day. You obviously would hold and trail a stop loss.

Question is, if you were new to that stock, would you buy at the 50% jump? If not, why not?

I would watch the price action the next day. If it opened near the prior days close and moved up I might add to my position. It it started to sell off I would probably exit the position and take my 40 whatever % profit.

If it gapped up the next day I'd sell part of my position into strength. I let winners run but I'm not greedy. Chances are it will back and fill.

 

[ironchef]

%%
Tough question.
NO\ but i dont do single stocks anymore 5% gap up all the time can BE A GOOD deal sometimes.WHY; i dont do single stocks anymore/LOL.
And thats why many let the profits ride. Some thing new i most likely would watch it for 50 or 55 days+++++++

I would watch the price action the next day. If it opened near the prior days close and moved up I might add to my position. It it started to sell off I would probably exit the position and take my 40 whatever % profit.

If it gapped up the next day I'd sell part of my position into strength. I let winners run but I'm not greedy. Chances are it will back and fill.

This is what both of you are saying:

Let the winners run is meaningless if I don't know what the underlying is going to do. If I know, I don't let the winners run, I have an exit ramp.

 

[deaddog]

This is what both of you are saying:

Let the winners run is meaningless if I don't know what the underlying is going to do. If I know, I don't let the winners run, I have an exit ramp.

I don't ever know what the underlying is going to do. I know what I'm going to do.

 

[Flowfollower]

Ok. Here's a test.

You're a trend follower who believes in letting positions run.

A stock you hold jumps 50% in a day. You obviously would hold and trail a stop loss.

Question is, if you were new to that stock, would you buy at the 50% jump? If not, why not?

Ok. Using 50% was an extreme example.

My point is that if you're a trend follower, you're relying on outlier trades for your profits. So why discriminate on entries?

Isn't the whole premise for trend following that you cannot predict what price will do next?

Surely a stock that is trending meets is that only criteria that matters and your stop loss will take care of your exit.

So what's with the selection bias?

 

[unconventional wisdom]

i'll share my strategy that's far from perfect but works ok: i buy stocks with steady upward momentum (higher highs, higher lows) and i sell after it's up 5-7% percent. if it breaks the trend downward I try to immediately sell. if it jumps 10-15% i try not to be greedy and sell.

my biggest problem is that I end up with a few stocks that suddenly change their momentum and I end up bag holding for weeks, months, and for some trades, likely years .. thanks a lot VLDR

here's an example: i've been trading this one in and out for the past few months. i recently got in again at $97.50 so my target is $102-103.

*looking closely at this chart, the trade is starting to look a little tired. might close it if we head lower in the new few days.

 

[ironchef]

I don't ever know what the underlying is going to do. I know what I'm going to do.

Don't tell me you are going to let your winners run?