When trading the trend....

R

redwagon

for the successful traders, do you guys get more shares when the stock pulls back or do you take your profit and try to establish a new position when it continues trending.

For example if the stock is downtrending and you get short at 19.50, it drops 5 cents but it looks like it is going to pull back, do you get out and look to short again. Or do you lose some of your profit as it retraces (you don't get ANY shares out) and you short more.

I have a hard time holding on for big winners because I hate lose the profit I just made. How do you guys hold for a bigger profit?

Do you just not watch it?
 
I call adding to a position scaling or pyramiding. I don't do it. I back tested different strategies with my computer and found there is little or no advantage to scaling / pyramiding compared to taking a single position and staying with it. That does not mean there are no scaling / pyramiding systems that work. I just did not see an advantage to scaling or pyramiding with the back tests that I conducted.
 
The trend is the major move in a certain timeframe. But unfortunately prices don’t go straight forward in one direction, there are always pullbacks. So if you want to take bigger profits you will have to stay in a trade until the trend is finished. If you hop in and out all the time you will, with high probability, miss many big moves. Being disciplined and willing to give back small amounts to the market are essential to take advantage of big moves. You must be able (mentally), to stay in a trade until the signal to close the trade. There are no gains without pain. When in a trade, NEVER calculate your profits, just follow your system and get out when you have to, not when you want to.
This problem is one of the major reasons why people are unsuccessful. They let emotions take over.


Quote from redwagon:

for the successful traders, do you guys get more shares when the stock pulls back or do you take your profit and try to establish a new position when it continues trending.

For example if the stock is downtrending and you get short at 19.50, it drops 5 cents but it looks like it is going to pull back, do you get out and look to short again. Or do you lose some of your profit as it retraces (you don't get ANY shares out) and you short more.

I have a hard time holding on for big winners because I hate lose the profit I just made. How do you guys hold for a bigger profit?

Do you just not watch it?
More...
 
Quote from redwagon:

for the successful traders, do you guys get more shares when the stock pulls back or do you take your profit and try to establish a new position when it continues trending.
More...

This depends in large part on how confident you are in your entry. If you haven't defined your setup and if you haven't tested it adequately (or at all) or if you're among those who believe that entry doesn't matter in the first place, then you are unlikely to have the confidence to enter with a full position outright. All of this forces you into making decisions regarding pullbacks and continuations and profit-taking and re-entry and so forth that you might not otherwise have to make.

If you bail at the first sign of trouble (and most beginners consider a pullback to be a sign of trouble rather than an opportunity), then you have to decide either to leave the field or re-enter. If your entries aren't exact to begin with, they are likely to be even less so on re-entry, and after several attempts at re-entry, you end up losing everything you've gained, if not turning your profits into losses.

So, you have to decide if you're going to tighten up your entries so that you can do greater size. This provides you with many more choices and the freedom -- since you're in the black -- to make them.
 
Quote from redwagon:

I have a hard time holding on for big winners because I hate lose the profit I just made. How do you guys hold for a bigger profit?

Do you just not watch it?
More...

#1. You need something that helps YOU define a TREND. That can be a number of different things.
a) a SMA
b) a EMA
c) the condition of the indices
d) the relation of the current price to the Open
etc.

#2. Once you enter a trade, you need to do what is known as "scaling out", which means, once you have a certain profit ($100 to $200 per contract maybe) you need to bring your protective stop to breakeven. Then just let the trade ride for the duration that it stays in your definition of TREND.

#3. Backtest the Money Management strategy and see how it works for you. (note: your first profit target must at least be the same as your protective stop). You should find that it does well over a certain number of trades.

Good Luck.

Jimmy

edit: I recommend this method because it will help you deal with the psychological aspects of being in a trade - do I take profits? - do I hold on for more? (which is about 90% of the game anyway).
 
Quote from Hook N. Sinker:

I call adding to a position scaling or pyramiding. I don't do it. I back tested different strategies with my computer and found there is little or no advantage to scaling / pyramiding compared to taking a single position and staying with it. That does not mean there are no scaling / pyramiding systems that work. I just did not see an advantage to scaling or pyramiding with the back tests that I conducted.
More...

I agree - adding to a winning position has not been advantageous in my trading either. I found it best to go your normal amount (in my case contracts in the E-Mini's) all at the onset. Adding to a winning position sounds great and looks great in hindsight, the problem is when do you add and why? In addition, it raises your cost basis.

But, this was what I found in MY trading. Yours may be different.
 
Quote from knifecatcher:

What indicator do you use to gauge the trend besides the usual moving average? Any good trend indicator for S&P emini? Thanks.
More...

I really like the Wilder's DMI (ADX) technical indicator.
 
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