What's Worse: Missing the Move Entirely or Giving All Your Profit Back?
- Thread starter schizo
- Start date
Ok, I follow . . . a la Al Brooks it sounds . . . but let me ask another way . . .
If you are typically a trader that targets risk:reward of 1:2 for with-trend trades, will you adjust your risk or reward for RTM trades to stay in the same R:R ballpark?
While my exit "points" might be a bit differently determined for trend vs RTM , I'm typically all out on RTM at defined targets but will try to catch a runner on trend setups. Personally, I'm not as good at this as I should be because my R:R isn't much higher on with-trend setups - probably due to trailing too tightly. And plus, some RTM trades become reversals and every now and then I'll trail if there's impressive momentum.
Sorry, I may be digressing from Schizo's original question.
JS
My RTM (counter-trend) trades really vary. Usually my RTM trades are only 1:2 or sometimes less because I'm looking for a quick scalp. But the other day I had a POT trade with a .10 stop and a .48 target (trailed a .10 stop when price approached target, looking for a bit more and ended up with .45 on the trade.) That was pure counter-trend right off the HOD, but the pullback zone provided a solid 1:4 ratio. With-trend R:R is almost always 1:3 or better (assuming I don't micromanage the trade and allow the price to reach target).
This past week or so I've been really putting effort into NOT trailing stops, but rather leaving them at b/e and waiting for target to be hit. Under certain circumstances I will trail a stop, but if it's a with-trend trade or off a good reversal signal, I'll let it ride.
I have a counter-trend ES short on from 1204.50 and decided earlier to take 5 pts profit on part of the position so I don't find myself whining tomorrow that I had 5 pts showing and got stopped out for a tick. My stop on that trade was initially 1 pt, so even though counter-trend, it was with the momentum of the move and the R:R was above average.
Not at all. Those are all good points which I enjoy reading. Keep the discussion flowing.
Note that a missed opportunity (eg. hesitating too long and missing the move) is taxonomically different from a lost opportunity (eg. bailing out too soon and missing a good portion of the move). i think this distinction should be clearly drawn.
Missing a move is great, as long as you gain patience from it.
Giving it all back to break even is tolerable in short time frames, but not so much in longer time frames where you watched a big winner start trending strongly against you and did nothing about it.
For me, avoiding a winner turning into a loser is much more important. I can't stand to lose even by a tick after the position had decent profit, I've gotten married to too many losers that way in the past.
Auto-breakeven is my friend.
Giving it all back to break even is tolerable in short time frames, but not so much in longer time frames where you watched a big winner start trending strongly against you and did nothing about it.
For me, avoiding a winner turning into a loser is much more important. I can't stand to lose even by a tick after the position had decent profit, I've gotten married to too many losers that way in the past.
Auto-breakeven is my friend.Scale out. For example today in CL.
See attached
See attached
So is it crap to give back all your profit? Well, I guess that depends. With the exception of perhaps 2 or 3 trades in the premarket, all my trades were break-evens today and I must say I'm pretty happy with the result.
What was different today in comparison to many other countless times when I would get stopped out at b/e is that it was done in a completely controlled manner. Unlike my usual repertoire where I would take half off the table and leave the rest to ride out the move, I intentionally let it retrace and stop me out. Psychologically speaking, this made a big difference for me.
At one time, I was up over 40-ticks. Now why would I give all that back unless I was an idiot? That's a reasonable assumption that I would have hard time refuting other than to say BUT THAT WAS THE GAME PLAN!
I came to realize that there's a big difference between zapping away your profit without fully knowing what the hell you were doing vs. giving all back in anticipation as dictated by your game plan.
In her book, Street Smarts, Linda Raschke wrote "the ability to trade using reverse logic is not easy. You must discard all your preconceive notions and opinions in order to truly listen to the market and recognize when its acting like a contrarian." (p.134) For too long, I've only applied logic to making money. I saw prices from one pivot to another and I would rigorously try to anticipate potential price reversals. I mistakenly thought the reverse of this logic is the natural extension for controlling losses. For example, if I caught the exact reversal, why do I even need a risk management?
What was completely missing until today was the reverse logic, namely, how losses can also be foreseen and anticipated just as price target (eg. reversal) could also be predicted in advance. From a psychological point of view, this is an eye-popper. At least for me.
What was different today in comparison to many other countless times when I would get stopped out at b/e is that it was done in a completely controlled manner. Unlike my usual repertoire where I would take half off the table and leave the rest to ride out the move, I intentionally let it retrace and stop me out. Psychologically speaking, this made a big difference for me.
At one time, I was up over 40-ticks. Now why would I give all that back unless I was an idiot? That's a reasonable assumption that I would have hard time refuting other than to say BUT THAT WAS THE GAME PLAN!
I came to realize that there's a big difference between zapping away your profit without fully knowing what the hell you were doing vs. giving all back in anticipation as dictated by your game plan.
In her book, Street Smarts, Linda Raschke wrote "the ability to trade using reverse logic is not easy. You must discard all your preconceive notions and opinions in order to truly listen to the market and recognize when its acting like a contrarian." (p.134) For too long, I've only applied logic to making money. I saw prices from one pivot to another and I would rigorously try to anticipate potential price reversals. I mistakenly thought the reverse of this logic is the natural extension for controlling losses. For example, if I caught the exact reversal, why do I even need a risk management?
What was completely missing until today was the reverse logic, namely, how losses can also be foreseen and anticipated just as price target (eg. reversal) could also be predicted in advance. From a psychological point of view, this is an eye-popper. At least for me.
interesting... but does it have to be an all or nothing scenario? why not book some profits on 1/2 the position?
Maybe I am just a blockhead but I can't seem to see how if when i entered the trade I was only willing to risk $100 why I would be willing to risk $500 as the trade develops. But then again my own targets do not align 100% with this line of thinking.
again - interesting conversation and I look forward to reading how others feel.
Maybe I am just a blockhead but I can't seem to see how if when i entered the trade I was only willing to risk $100 why I would be willing to risk $500 as the trade develops. But then again my own targets do not align 100% with this line of thinking.
again - interesting conversation and I look forward to reading how others feel.
I use a risk to reward strategy for exiting a trade.
I have a target in mind when I enter a trade. As price approaches my target I keep in mind my original risk reward numbers.
If I originally risk S100 to make $300 then as the price gets close to my target it doesn't make sense to risk $250 to make the last $50.
Once I get 3/4 of the way to my initial target I trail a 1 to 1 stop.
If it shoot thru my target I go with it and if I get stopped out I go on to the next trade with some money in my pocket.
Once the trade is over I wait for the next set-up. As long as I stayed with the strategy I am using, it's a good trade. It is what it is and I can't lose sleep over woulda, coulda, shoulda.
This probably makes many a trader dump their systems more than anything else. The system leaves money on the table here... ignores huge trades there.. will drive a man mad.
THE best solution is a system (even discretionary) MUST consider volatility as this decides what is the whole move most of the time. I recall Richard Dennis calculated volatility everyday and used it in his system but even he used it only for money management NOT to determine how long a trade should last. Therefore no doubt his system as most do, suffer in unfavorable market conditions.
That said you must find a way to hammer in your head that your stop is where YOUR money is.. anything above or below (short) that is not yours and the minute you start counting it trouble starts..
For me a few days ago I bought NQ at 1986 EXACTLY as a planned trade and took 3 points.. it closed in the 2015 area.. THAT hurt much more than never having taken the trade.. I never even let it go up and take the profit back. So there are greater self inflicted scars...
Money not made is not Money lost..
THE best solution is a system (even discretionary) MUST consider volatility as this decides what is the whole move most of the time. I recall Richard Dennis calculated volatility everyday and used it in his system but even he used it only for money management NOT to determine how long a trade should last. Therefore no doubt his system as most do, suffer in unfavorable market conditions.
That said you must find a way to hammer in your head that your stop is where YOUR money is.. anything above or below (short) that is not yours and the minute you start counting it trouble starts..
For me a few days ago I bought NQ at 1986 EXACTLY as a planned trade and took 3 points.. it closed in the 2015 area.. THAT hurt much more than never having taken the trade.. I never even let it go up and take the profit back. So there are greater self inflicted scars...
Money not made is not Money lost..