Taking profits versus running profits

[waytogo]

Hi everyone

Every day I suffer the same dilemma with my day trading - do I take profits after, say, 10 points or do I run my profits until some kind of reversal. It seems that whichever I choose, it is wrong on that day! If I take profits, that was the time when I should have let it run for a significantly greater profit, but if I let them run, I get stopped out for a loss or a very small profit. I was wondering whether any of you suffer the same dilemma, or do you always stick to one or the other method? I know it can be a bit subjective according to the method that you use to trade, but do any of you have any ways of knowing when there is good enough momentum to let a position run? Or is it just intuitive?

Looking forward to your thoughts on this.

waytogo

 

[Mr. Charts]

This depends on the type of day and many other factors.
If it's a clear trending day you stick with your winning position longer, though this also depends on the leading indicators and time of day.
On a choppy day, take all the profits when the market gives them to you.
I teach the people I coach to always run a trailing stop and to lock in profits wherever possible. For example, let's say you go long 1000 shares at $61.20 and the momentum as shown on trade flow and bid/offer changes or falters at $61.80, I advise my clients to take half their position off the table (500) to lock in profits of $300 and then micro manage the remainder using various techniques, but never to give back more than half the gain on the remaining 500, i.e. place a mental stop at $61.50, but if the trade does turn against you and starts a new downtrend trend or it looks as if the trend has run out of steam, just get out. Don't wait for the stop to be hit.
You mustn't beat up on yourself because you can't predict the future. The objective is NOT to be right all the time, but to be PROFITABLE most of the time.
Bank the profits day after day, never think you should have stayed in/got out - that's easy in retrospect.
Hope that helps.

 

[waytogo]

Thanks Mr Charts, that does help a lot, especially that last bit. I probably do spend far to much time worrying about what might have happened if I did things differently.

I only trade ftse futures, but what you say above is still relevant. I'm not sure what you mean by 'momentum as shown on trade flow and bid/offer changes' though. Could you explain that please?

Waytogo

 

[Mr. Charts]

My pleasure.
You need to see and judge the depth of market, volume bid and offer, what the actual trades are and at what price. You gradually develop an understanding of the ebb and flow of supply and demand and how it behaves at key inflection points, like Fib levels, floor pivot levels, support/resistance etc.
I used to trade ftse futures, but found eminis easier and now mainly trade US shares for consistent intraday profits and much less pressure.
That attitude comes after years of trading UK shares, futures, options and then US futures and now I find US shares intraday are the safest and most profitable way to trade.
One approach which I used extensively and works a treat on ftse futures is to exit your position on any spike.If you are long at say 3930 and it suddenly spikes to 3944 in a couple of minutes, sell your position as the locals are selling and the spike often reverses very quickly.
I shan't wish you "luck", anybody that thinks "luck" is other than a very minor factor is sadly mistaken. This profession is about other things.
Learn them. apply them and you can also reach the target of day trading for a living with minimum stress.
Few achieve the dream because they don't put the effort in and just look for a Holy Grail.
It's in yourself and is about learning, self-discipline, application and determination and fortitude. Same as in much else in life.

 

[waytogo]

Thanks for your help and excellent advice Mr Charts, all very useful.

I like to think that I am on the way to being a successful trader (although my account balance suggests that I have still got a little waytogo!). Like you I started in UK shares, then CFDs, then spreadbetting (companies first, then FTSE100) and then realised the hard way that I was never going to make money trading intraday through spreadbet companies, so have now 'graduated' to direct access, which is going much better. I treat trading as a full time job even though I am not yet earning a living from it (probably spend too much time behind the computer, actually), and have made zillions of mistakes. My determination has not lessened, however, even though I do have days when I feel very despondent.

Since changing to futures trading (only a few weeks ago), I do feel that my trading has taken a step forward. Most of the time now I am disciplined, although I do still occasionally enter a trade for the wrong reasons. I nearly always enter and exit trades using stop and limit orders so that I do not dither at decision times (something I used to do ALL the time!) I always run a trailing stop, although as I work from 15 minute charts, this is possibly further away than some people would feel comfortable with! My main issue is the profit taking one - I suppose I just need to develop a few rules, as you say, according to momentum, time of day, spikes, etc, and stick to them.

For the moment I am happy trading the FTSE future, as the timing of the US markets do not really fit in with family life (perhaps when my girls eventually leave the nest, many years hence, that may change).

I also found this website only a few weeks ago and think that it is excellent.

Thanks again

waytogo

 

[CityTrader]

Mr Charts... I'm intrigued.. you coach people? Forgive my inquisitiveness- only having been on T2W for a couple of weeks.
You coach them to trade? I thought " trading coach's "( coaches?) only existed in USA. Having been a professional trader in The City for 25 years, the only other "coach" I have ever heard of is that Darryl something or other- and that's only from his self promotional advertising.
How do you teach someone to be sharp? or intuitive?
Maybe my transition from The City's trading floors to trading for myself, isn't goingto be as smooth as I envisaged? In 25 years I have never met a sucessful trader who relied on charts.. only used them as a confirmation.

W

 

[Mr. Charts]

Hi wayno,
I've typed out a full reply, but the thought has struck me that the moderators, and others, might consider it as some sort of self-promoting advert, so I won't post it.
If you want to email me at

[email protected]

I'll send you my reply.

Which instruments have you been trading?
Regards,
Mr. Charts

 

[CityTrader]

Mr Charts - spent last 15 years market-making European equities, prior to that I ( briefly) traded FX and before that traded base & precious metals. Only markets I ever found where a chart ever worked was base metals. But that was 20 years ago - About 6 years ago, I arranged a 2 day charting course (by Patrick something-or-other- the guy who is one of CNBC's guest speakers) - an ex LIFFE local- interesting, but I'm not sure any of the 6 of us who attended actually learnt anything in our day-day trading lives.
I've sent you my email address.

 

[dave2rave]

Nice piece of advice. Thanks.

 

[zigglewigler]

This used to pee me off when I started too. There is a simple solution. Stop and reverse. I'm always in the market, I trade the ranges, ride high to lows and vice verse. My system just follows the intermediate directional changes, I like good runs whenever possible(who doesn't), but if I'm stopped out for a small profit/scratch/small loss, I don't worry because that's the signal to trade the reverse for any possible momentum play the other way. I therefore don't miss the boat. And certainly no head scratching as to should I, shouldn't I, oh nuts!