When should you give up trading?

[dbphoenix]

In reality, I think many traders just throw in the towel too soon. In life as well as in trading, having gut is an edge.

But it's always a sensible thing to reduce exposure after a string of winning or losing trades.

The edge is not in guts but in having a consistently profitable system.

Novice traders are regularly encouraged to stick with it no matter what and never give up ("winners never quit"), and I know at least three people who lost everything because they listened to this "advice".

Anyone who's wondering if he ought to quit probably should, unless he views his life as some sort of movie starring himself.

 

[Chicken Curry]

What does 'reducing exposure' actually mean?

Reducing exposure must mean reducing the size of trades and / or value of shares or other instruments traded.

Nothing to do with size of stop loss imho.

 

[Chicken Curry]

In reality, I think many traders just throw in the towel too soon. In life as well as in trading, having gut is an edge.

If you have a good system that wins consistently and a sensible approach to money management, there is absolutely no requirement for guts.

You will need guts if you have a cavalier approach to trading and no sense of money management. In this case the only edge you will ever have is the edge of your seat which you will consistently fall off as you spill your guts.

 

[SOCRATES]

If you have a good system that wins consistently and a sensible approach to money management, there is absolutely no requirement for guts.

You will need guts if you have a cavalier approach to trading and no sense of money management. In this case the only edge you will ever have is the edge of your seat which you will consistently fall off as you spill your guts.

I wouldn't call it guts. I would call it conviction.

Conviction is an awareness of near certainty or very near certainty.

This conviction is the basis on which to commit.

Often this commitment has to be done in the face of the majority popular opinion.

The majority popular opinion is nearly always wrong.

So, in addition to the pressure of the irrevocability of the action to commit there is peer pressure to disregard or overcome.

These two components highlight difficulties for those not prepared in advance of the event.

 

[dbphoenix]

Conviction, guts, whatever. Without a consistently profitable system, there's only one outcome.

As for the majority being wrong, Bertie provides further evidence of his level of competence. The crowd is, in fact, always right, except at turning points.

 

[TheBramble]

What does 'reducing exposure' actually mean? Using tighter stops? This may increase the number of losing trades.

Reducing exposure means having less of your capital at risk at any one point in time. This is normally, though not necessarily only, intended as a general condition. However, there are circumstances where you may wish to reduce your exposure in just certain sectors or classes of instruments based on current levels of volatility, news, reports, mad action. But most generally, it refers to your overall position or exposure to 'The Market' in general.

Tighter stops don't really come into it. Stops need to be where stops need to be, but if you're using your stop size as a basis for calculating your trade size prior to taking the trade (I can't think of any other way I'd want to do it) then reducing exposure would suggest keeping the stop size the same (however you normally determine it) and simply reduce the size of the trade (number of lots, stocks, whatever).

Reducing your exposure could also mean just plain staying out of the market. Keeping your head down until you, or it, get back in sync.

As a final point, yes, typically tighter stops may mean an increase in number of losing trades, but not necessarily the aggregate amount lost. What would you rather: One losing trade at -$1000 or 10 losing trades at $75?

 

[new_trader]

Reducing exposure means having less of your capital at risk at any one point in time. This is normally, though not necessarily only, intended as a general condition. However, there are circumstances where you may wish to reduce your exposure in just certain sectors or classes of instruments based on current levels of volatility, news, reports, mad action. But most generally, it refers to your overall position or exposure to 'The Market' in general.

Tighter stops don't really come into it. Stops need to be where stops need to be, but if you're using your stop size as a basis for calculating your trade size prior to taking the trade (I can't think of any other way I'd want to do it) then reducing exposure would suggest keeping the stop size the same (however you normally determine it) and simply reduce the size of the trade (number of lots, stocks, whatever).

Reducing your exposure could also mean just plain staying out of the market. Keeping your head down until you, or it, get back in sync.

As a final point, yes, typically tighter stops may mean an increase in number of losing trades, but not necessarily the aggregate amount lost. What would you rather: One losing trade at -$1000 or 10 losing trades at $75?

Thanks, makes things clearer.

 

[new_trader]

Conviction, guts, whatever. Without a consistently profitable system, there's only one outcome.

As for the majority being wrong, Bertie provides further evidence of his level of competence. The crowd is, in fact, always right, except at turning points.

db,

You continually quote "a consistently profitable system". So my question is:- When do you stop trading that system? Or more specifically, what will convince you that a system is no longer performing as opposed to being just an abnormal drawdown?

How do you reduce exposure if you are trading the minimum possible, 1 futures contract?

 

[dbphoenix]

NT, believe it or not, I'm not out to hurt your feelings or offend you, but if you don't know the answers to these questions already, you have no business trading, much less trading futures.

I've answered the question about when to stop trading a given system twice. I see no point in answering it again. As for reducing exposure, again, if you don't know the answer to this, you shouldn't be trading.

For whatever reason, you are far too impressed with your backtest. Backtesting isn't even the beginning of the process, but neither is it the end. After that comes forward testing, then paper-trading in real time, then real-time trading with as small a stake as possible. Then there's the whole area of money management. You have already made up your mind about so many things without having any basis whatsoever for the conclusions you've drawn. But you are nowhere near the point where you are ready to begin again and do it right. You really need to stop trading until you've gone through the drill. Otherwise, you may as well convert your account to cash and set it on fire.