what time frame to enforce the "never let a winner turn into a loser" rule?

[Bear Trader]

'Be Patient'


I am actually 100% certain that if 90% of people held back on their 80% of their trading decisions they would be very rich. The amount of posts I have read with people asking for advice on many trades I would consider high risk with low probability is shocking. Who gives a shit if there is divergence or a breakout has occurred when you are trading against the trend? Or trading in a sideways market.

What the fuck is the hurry? Why cant people just be patient and wait for the best opportunities? Seriously some people here just get over excited as soon as they see one of their signals. It's like golf on a par 5, going for the flag on your second shot with 250yards to a green surrounded by water and the flag tucked next to the water

Why did you not wait for the derivable par 4's or the easy Par 5's? You couldn't because your brain is telling you 'it's par 5, I am supposed to make birdies on the par 5's, I can get to the green in two' And guess what happens when they try and pull of the shot off? Yes you guessed it, in the water and now what should have been a birdie chance becomes a survival to make bogey.

The best golfers and traders are the patient ones.

 

[TheMagican]

Quote from bone:

For me and my clients, we build our stops and our profit targets around volatility and trading ranges.

There is no static rule: each instrument has metrics - let the product tell you.

Hi Bone,

how much time on average it takes to learn your wisdom?I mean,not for a newbie.

 

[AAAintheBeltway]

Quote from tradingcards:

Was wondering if the saying, “never let a winner turn into a loser 1.) applies to beginners, 2.) If it applies to swing trades, 3.) how much time do you give a trade before you enforce that rule? For swing trades, for example, do you give a trade 1 day? What if it only moves up a fraction?
Btw, what I mean by "if it applies to beginners" was that I know beginners should use hard stops (predetermined), but at what point do you lock in a gain and not let it turn into a loser. I would imagine this is sound money management even for a beginner.

Any help is greatly appreciated

1. Yes, it isparticularly important for beginners to ingrain good habits.

2. Yes, I would apply this rule to swing trades. The only difference is your definition of what constitutes "profit." For a swing trade, it might be somewhat more than a day trade.

The way i look at it is there is a noise zone around your entry point. How big it is depends on what you are trading and how volatile it is. You want your stop loss to be large enought that noise doesn't kick you out. similalry, what qualifies the trade as profitable has to be some move that clears the noise zone. That zone is larger on a 60 minute chart than a 1 minute chart.

3. This is tricky. On day trades, I would hope to exit a reversing winner before b/e. I wouldn't be worrying about timing, just price. Thsi assumes the trade had cleared the noise zone and gone to a clear profit.

On swing trades and particularly longer term holdings, I would really hope tohave taken proifits before it got back to b/e. The b/e stop is kind of a fail safe to rescue you from bad judgment. When it hits b/e, there is no more room for discretion. Out it goes, no questions asked and no recriminations. That said, on a swing trade I would probably try to give it to the close if it wasn't just falling out of bed. A lot fo times this can be a bad idea however, as there are others doing the same thing and waiting to see if it recovers. That's why stocks that take a hit usually close at the lows of the day.

I think the 50% pullback criteria someone above attributed to Steenberger is very useful. I know Jim Cramer has advocated it as well.

The basic idea is if you have a good-sized winner, you want to try to hang on to it as long as possible, but you don't want to give too much back. On a day trade, most people will just exit at resistance or a clear target like a prior high, and hope to get back in on a pullback. On swing trades or longer term investments, that is not as feasible. You have to ask yourself what the extent of a normal pullback is likely to be, and if you can hold through it. If not, you get out then and there or on a reversal bar.

Let's say you decide to hold. If it gives back half the profit, then the 50% rule kicks in. Usually if it has pulled back that much, more is coming. So you admit you made a mistake but still walk away with half a loaf. The b/e stop is more of a fail safe if you miss the other opportunities to exit.

 

[zdreg]

Quote from tradingjournals:

Trading is difficult in part because there are a lot of things you are allowed to choose.

ay yes, trading is another example of the paradox of many choices leading to less satisfaction not more satisfaction.