This problem pops up for me sometimes. Probably six times in the last week or so I have had a great profit on an option trade and not exited and of course you guys know what happens next! Profit gone and I have a loss. I know this is greed telling me if I hang on I can make more. I’m gonna implement an old strategy of mine which is to immediately put a limit sell order at a predetermined profit right after I enter a trade. And just let the computer do the discipline work that I can’t seem to do currently. Does anyone else struggle with us?
da-net
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Yes, I do as well John. Looking over my winning trades, I found that I lacked conviction about where price was going and exited far too early on winning trades. This resulted in leaving at lot of money on the table as well as thinking counter trend had started which was not there. I decided I needed to find something that I could have more confidence in. I am currently in training on Elliottwave + Fibonacci, but have only progressed to daily time frame with conviction. The other thing I've noticed is the market chop, requires faster decision making which has caught me a few times.
Generally speaking, failures associated with entry, exit and stopout are the result of 1) lack of understanding of how your market typically acts
and after that, not having a volume based method for determining when larger forces are stepping in to change or alter a trend move.
This is characteristic of retail traders everywhere. "Conviction" has to be based on some objective standard. Most professionals use volume
based data points. "Just having a strong feeling" does not work.
Reverse Engineering
One method for developing a better understanding of your market is to reverse engineer successful trades, and that means to work from
the high or low of a trend move back towards the point at which you would be entering. Those who try this soon discover that their target
market moves in specific increments repeatedly. It is also possible to learn how to position stop loss in the same way. Finally, skilled traders
can (also) determine whether they have a system with a reasonable statistical edge, and this is done by the same analysis of at least twenty
(20) preferably thirty (30) trades. In my market that covers about a month.
Timing
In the market I specialize in, a scalp is 3+ and a swing almost always moves in increments of +10. My typical stop is 3-4. The final key to
the puzzle for me is timing. I know the approximate time(s) at which my market is likely to move AND how long typically, the moves will
last.
Good luck
and after that, not having a volume based method for determining when larger forces are stepping in to change or alter a trend move.
This is characteristic of retail traders everywhere. "Conviction" has to be based on some objective standard. Most professionals use volume
based data points. "Just having a strong feeling" does not work.
Reverse Engineering
One method for developing a better understanding of your market is to reverse engineer successful trades, and that means to work from
the high or low of a trend move back towards the point at which you would be entering. Those who try this soon discover that their target
market moves in specific increments repeatedly. It is also possible to learn how to position stop loss in the same way. Finally, skilled traders
can (also) determine whether they have a system with a reasonable statistical edge, and this is done by the same analysis of at least twenty
(20) preferably thirty (30) trades. In my market that covers about a month.
Timing
In the market I specialize in, a scalp is 3+ and a swing almost always moves in increments of +10. My typical stop is 3-4. The final key to
the puzzle for me is timing. I know the approximate time(s) at which my market is likely to move AND how long typically, the moves will
last.
Good luck
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sideways-sid
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Place Closing orders at your expected profit level ASAP after Opening orders fill.
If position size is sufficient, you can place orders to take risk off / reduce VaR and work up/down to your expected profit.
da-net
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I hope that I can offer you some help that I found very useful. I'm barely into re-education, but have experienced more winners and got out at decent prices, even though sometimes early. I'll be happy with gains in the middle and not shoot for tops or bottoms. Here's where I've gotten some help;
Wade @ tradeats.com has a free course and it's worth your time to watch 2X minimum.
Aldo @ technical analysis institute has a free 5 lesson EW & Fib course by email. I opted to take his mentoring which is helping more and not expensive.
Bella @ SMB trading has lots of good content on youtube and they offer their in-house trade strategies as downloads for free. They also have an excellent course if you think you might be prop trader material, but you might object to the cost..
Hope these things help.
Wade @ tradeats.com has a free course and it's worth your time to watch 2X minimum.
Aldo @ technical analysis institute has a free 5 lesson EW & Fib course by email. I opted to take his mentoring which is helping more and not expensive.
Bella @ SMB trading has lots of good content on youtube and they offer their in-house trade strategies as downloads for free. They also have an excellent course if you think you might be prop trader material, but you might object to the cost..
Hope these things help.
I really like your emphasis on anlayisng and understanding the structure of your winning trades.
So many traders place all their emphasis on their losers, as if they feel that if only they didn't have so many losers they would be a profitable trader. This is a fallacy, the win rate of a strategy is almost intrinsic to the strategy and very hard to significantly improve. Far more effective to improve the individual performance of winners than to convert losers into winners.
ChrisDouthit
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This is a problem that everyone deals with, and you'll deal with it forever. Sometimes it feels like whatever you decide to do is wrong. If you sell, the position increases; if you hold, it drops. For shorter-term swings, the best thing you can do is use technical analysis. If you want to break it down a little more, I recommend using Elliott Wave technical analysis. This is the best for learning how to time trades.
Hello Tomorton
Thanks for your kind comment. This last month I was teaching a class and could not reply. My obligation ended last Friday and
as a courtesy I wanted to add a followup
Item 1
I teach new hires at commercial firms. Also on occasion I am asked to try to help if traders are having difficulty and want to consider
possible alternatives. This is a very competitive profession and if one of those alternatives is to find a new job, traders are usually willing
to at least listen to what I have to say.
Item 2
I start by analyzing a sequence of trades. By "sequence" I mean at least a week (preferably a month). What I am looking for are patterns
Because of privacy considerations I won't go into details however the pattern I often see, is traders failing to see (and incorporate) the
broader context. Usually when readers see this, they assume I am talking about the impact of specific economic reports. I am not
The top 10 firms (banks & funds) that control the markets, have the ability to move the market whenever and wherever they want
Those that are publicly traded have the obligation to report on a quarterly basis, and if you look at their performance you will discover
that they almost never fail to report big profits. The bottom line is that skilled professionals know how to anticipate when the markets
are most likely to move and in which direction. In contrast, most amateurs have no clue or just guess based on what they read.
Item 3
When I see a sequence of trades that is "out of synch" with the broad market, I know that 1) this trader doesn't understand the full picture
and 2) that his "edge" (if he has one) isn't "stable". What he may have is known as a "seasonal" edge, that appears and disappears and that is why he
is having problems
Solutions
I don't want to know what the trader's system is. Couldn't care less. If what he does is inconsistent, what good is it really. Instead I ask one
simple question. On any single trade, what is your exit rule (what is the rationale)? AND then I substitute my own systematic approach using
one of several exit styles
We backtest the new exit and (what a surprise) the result is often (almost always) immediate improvement. Changing one thing
Once they see that initial improvement, we move on to the broader problem (how to "see the market").
I don't know you Tomorton, but I suggest you begin by looking into (googling) Chuck LeBeau's "Chandelier Exit" as a starting point.
If you find something in that search that works (and I am not teaching a class) perhaps we can talk about more about the big picture.
Good luck
