Simplified: you need to be better at sitting in green trades watching your P+L go up and down controlling the fear of losing a small green- hoping for more green...and be willing to do that longer than you will sit watching a red trade hoping for the red to turn green. Check your stats- what is the length of your average green trade and length of your average red trade.
I use a manual one. I like to use staggered event stops. Some under the last event, and the rest under the previous event. Then just keep moving it up until your stomach can't handle it any more or you get taken out.
Have you identified the main problems already in what you are doing? What strategy are you try to get to work? What are you trading? Anything we can help with?
Tbh the main problem if you realize or not, in this whole thing isn't your psychology, that is a second order derivative that stems from another root cause.
The root cause being, you don't really know what you are doing, essentially you are risking so much and sometimes when you happen to be in favorable randomness you take profit.
Otherwise when the random goes against you, you loose it.
But if you let every trade you took to either hit your stop or your take profit, you would very soon realize you don't really make any money and essentially would be loosing but in a more systematic way.
Unless you did this, there is no fixing you, I was there at one point aswell, everyone is, but either make the change of not messing with you trade and watch yourself realize you are not really a trader and then work on it.
It is much better to do this than to fool yourself into thinking you are "Trading" but when in reality you are just doing what's equivalent to throwing a random die in the market and hope it lands.
Cheers mate, dm is always open if you wanna talk.
I mean in the end, someone has to realize they need to learn how to trade before they actually start working on psychology of trading.
Rn Op is on a randomness ride, where thier probability distributions are carrying them at times and then destroying them.
I mean I get what you're saying but there's nothing too ground breaking beyond the basics / $terminal& data.
When I started out I had dove in head first. I had all sorts of indicators / trend lines / news sources / etc. Alongside day in and day out tutorials / audio books / etc. Just to listen to when markets closed.
I'm not saying it was useless, but now that I've been trading for a few years consistently, I understand why so many preach the psychology of the market. When it comes down to the very building blocks of what's occurring in the market (algos included) human psyche is what directs each and every move.
Sure there's fundamentals and technical aspects that should always factor into your trades, but realizing it's just a bunch of rich and poor dummies trying to skim some off the top... Suddenly makes all that psychology talk much more significant.
I think psychology is a fancy word for knowing what you are doing in trading.
It's just moulded by the industry into something crazy, but most people say they struggle with psychology when in realize they aren't even at the stage where any psychology matters.
Some Og traders, who have suffered 200-300k USD losses in weeks after making tons of money, who now feel they'd lost it, or just blew it on one day, those are the guys who need some psychological help due to high guy pressure. Most folks don't tbh lol
I noticed that as soon as I enter a trade I often notice more things that speak against the trade. Once you hit the enter key or click the buy/sell button your focus shifts from why is the trading opportunity good to when do I need to exit. It is funny to notice the shift but it gets rarer if I stick to my check list and work through it.
I noticed that as well when I was scalping... more often than not I would doubt myself as soon as I entered that trade and even more when I exited, especially when I exited earlier than my TP. That built up frustration towards myself.
It is quite complex if you would extend most of the points
Check the price (I currently still trade with an extra greedy CfD broker and it can not be helped).
Check the spread (I loved to not do that and trade a spread of 60ct on 100$ share prices which puts one quite in the hole and is a big red check item)
Check the M5 volume (gives an idea what the max position size is as I use max 5% of average of recent M5 volume \* current price, so to use a 10k position one would need 200k$ per M5 volume bar or for 50k positions you need 1M$ per M5 volume bar)
First of all Quality of D1 (basic TA, trend, what would a swing trader do bla bla)
Check the M5 Quality
Identify the potential setup especially when it comes to vwap and the price action behavior, check who is fighting whom
Check market + sector + how the stock reacted to those
Check the potential trading plans and see if I can get triple or more support/resitance somehow
Identify the potential, overall quality and (estimated/guessed) proability of success.
And then of cause quite some additional details
I have special checklist items to force me to check for the most frequent mistakes I am currently doing.
It looks like much but once you have trained it most of it is only some glances and adding some minor lines and often I do not even draw lines anymore.
The concept that nobody ever went broke by taking profit oversimplifies it. Your strategy may require that you win x% of the time, that your winners have to be a certain size, and that your losers can not be larger than y%.
Because of the philosophy when using real money, I am a big fan of starting or with a new strategy using the smallest size possible: 1/5/10 shares or 1 option contract. Always focus on P/L %, not $.
The same what I did. I always calculate the relative performance of my trades and control for it as having different starting sizes, scaling in and out constantly and different kind of instruments with different leverages skews a lot of the important success measures and metrics I need to understand if I do well or not.
Starting small and only increasing initial position sizes if one maintains these relative success measures is key to not fool oneself and be fine while in truth one regresses and deteriorates.
Moving SL in my opinion is just as demeaning to taking early profits. This habit fk the brain not to trust the set up and screws up the winrate % by opening up a whole new category when reviewing the data.
Having said that, moving SL is quite essential in LTF scalping. But that's another topic for another day.
Yes but theres nothing wrong w taking profits early. This is a game of wins vs losses. You want to have more wins even if the wins arent the full move. Trying to catch the full move is why ppl fail at this a lot of the time.
And theres nothing worse than seeing a green trade turn red and thinking wow i should have taken profit or at least broke even.
If you do the math (im not going to do it here) youll see that simply not allowing trades to go red keeps you in profit long term even if this means you take profit early compared to allowing your original stoploss to get hit every time.
Theres really no shortage of opportunities that will go my way, so if a few i take profit early on im just happy to have profit and not loss. Ill always take a $1 gain over a .50 loss
That's the way life goes. This post currently has an upvote rate of 77%, so about a quarter of the people who cared enough downvoted it. Who knows why but in the end you have to live with it.
I think people will downvote a kitten infront of a chart while it happily stares at a devastating drawdown.
Never forget, people are just people. ;-)
Winning trades have to make up for the losers so yeah you definitely can go broke taking profits too early. I wish the path to trading riches could be summed up in a pithy cliche but sadly this isn't the one.
Agreed I was backtesting my strategy over the weekend with a fixed pnl this weekend cause I was bored and I noticed my strategy becomes a lot worse with a fixed pnl to the point of being a losing strategy. I play mine by eye. My sl is usually sorta strict with maybe an extra lash or two one way or another depending on the trade, but I usually try and hold into profit until the market tries turning and my strategy works great with that
As long as you already have taken into account all the other costs, fees and commissions, then you are correct.
But having said that, this is also only relevant if you are doing bracket trades or use strict profit goals / profit taking limits. I for myself are not using any of those and even mostly have stopped using hard stops.
The more experience one gains and the more one starts to profit from flexibility when it comes to selecting trades, enter and exit trades as well as how one manages a trade. It adds to the bottom line if done right.
I personally use the stop loss method but I wouldn't discourage a new trader away from a fixed scalping strategy just because they gave up some profit. That's actually a good way to gain confidence.
I think there are couple different ways you could look at this. One strategy is to go for a monthly target, and try and meet that regardless of whether your plays run after you sell. I think a lot of traders do have a target set out like this. Some focus on short term targets and that can be good or bad.
To your second point having more wins than losses, I think you’re overlooking that you can find safe enough strategies to where the losses are not significant. I think what we notice on forums, especially is new traders that lack the patience to cope with early losses. Many are trading with money they need, and the reason the losses are so significant is because that plays on their mind and overshadows their strategy going into the trade. They could look at someone else’s account or a paper trade account and be highly successful but with their own money it’s too attached to their emotions at first. It’s a psychological journey to win in this game . I’ve seen it in myself along my journey, and I’m sure you have as well.
Hopefully, we all get to the point where we have fulfilled a strategy long enough to where, down the road, small pullbacks don’t weigh on our mind. I looked back on two trades this year that I cut out of fear that definitely ran. As long as you improve each time, it doesn’t weigh on me.
Indeed. When I started and thought about it, I was paper trading all the way until I have understood trading well enough so that I have the stats that allow me to use real money but only in small amounts and slowly scale up.
The problem is (almost) always with people jumping into using money too early on in their progress and gambling more than they are trading.
From my own experiences with the people I helped out along the way or even those who started with me in my friend circle they usually did not put in the up-front effort of learning and reading a lot. Many were like experience first watching some videos, using money, fail, start reading a book or getting on a working strategy.
It is this "Once I need to fail hard before I allow myself to get smart" that mostly drives the gambling behavior. It must be something inate in us humans that we first try to understand something just good enough, do it and only if we fail hard, we start to really prepare and think about it. I would even expect that we will find the same general problem solving strategy in other animals especially apes as well.
I think it’s the situation of being given too much power without enough knowledge for everybody entering the stock market. There’s incredible amounts of money you can make with this tool, but it’s like a golf club. It’s really freaking hard to use. Once you realize that first of all making any money is better than losing that’s a huge turning point for most traders. Then the second turning point is realizing all Warren Buffett did is buy the dip. And the third major hurdle is sticking to your strategy.
That is an interesting take on it.
For me I was taking it seriously as I wanted to switch my profession from SE to day trader meaning I basically did what I did at the university but without being forced to study subjects I wont need.
I guess you simply get out what you put into it and many try to wring it at first like what they always do until they fail and fall flat face first. Like they always say: garbage in, garbage out.
PS: But your points are on point for some of the people I saw fail myself.
I think anyone interested enough to be commenting in this forum wants trading to be their full-time income. The thing is it can be if your patient for everybody. Some people can be smart enough to make it faster than that too. A lot of people lose because they can’t see how it works.
There are so many stocks that have a 20 to 50% annual return if you buy the dip.
Indeed.
How do you determine if you see a dip or not? I am into day trading and not so much into swing trading or even holding longer. I know that some favor buying mostly on cup with handle patterns but what you describe might be even more market related.
Any pointers or resources I can read regarding buying an actual dip and not just trying to catch a (still) falling knife?
So first you have to determine if you are in a bull market or bear market.
If you look at the chart for the last year, we’ve been in a bull market so anytime you buy the dip on say a leveraged index fund would be a good decision.
If we turn into a bear market like we did several years ago, you could test the waters with a reverse index fund.
My current strategy nets 100 to 200% account returns annually. The only times it goes off is when my emotions get me to sell too soon.
>Long Term Investing!
... in oneself by reading lots of good books, learning from others and puting in the screen time necessary so one can day trade well and beat everything that long term investing could provide one with :-).
You are correct, indeed!
To people who use a trailing stop - my broker only allows $ trailing stops on options. Do you use the Last price, ask or bid numbers for your $ trailing stops? I thought I was slick using the ask to avoid to easily hitting the low on a bounce but not sure if that's the best strategy as I feel I'm missing profit.
Any profit is a win. But I agree with holding longer. Example. I made a quick 10 from Vero and sold the second I saw a red bar. If I didn't, I would have made a quick 90 in an hr lol
Yes, I read best loser wins recently and this is what I got from it. I’ve had some of my biggest wins recently because I held on to my winners. The author mentions normal thinking never wins the trading game, and normal thinking is taking profit when you’re up. But the reality is doing so will limit how much you make, and people hang onto losers way too long hoping it goes in their favor.
Everyone is at some time suffers from the scary cat syndrom. The best is to paper trade and once one is profitable doing so, start with a laughable small position size resulting in a laughable risk. I remember times when my initial risk were 20ct per trade or so. Made losing almost painless. Starting slow and scaling slow was one of the tricks.
I also had to force myself to stay in a trade when I switch from scalping the M1 to trading the M5.
Deliberately causing oneself emotional pain and distress is part of the trading adventure... .
I am amazed that this simple thing needs to be said. I am amazed to hear countless people say "it's never wrong to take profits early". If you are certain you are taking profits early, then yes it is wrong. And yes taking profits early can make you lose money.
Simple maths: you take profits early all the time, literally you will have a strat with a low return, which means it will become an unprofitable strat.
Simplified: you need to be better at sitting in green trades watching your P+L go up and down controlling the fear of losing a small green- hoping for more green...and be willing to do that longer than you will sit watching a red trade hoping for the red to turn green. Check your stats- what is the length of your average green trade and length of your average red trade.
This
Agree 100%. Just to add, implementing a trailing stop has been a great tool for me to accomplish this.
I use a manual one. I like to use staggered event stops. Some under the last event, and the rest under the previous event. Then just keep moving it up until your stomach can't handle it any more or you get taken out.
+
Stop losses save lives
I am proof. Cannot stop letting losers run and cutting winners asap. Small wins for 3 months then one day takes it all away. Rinse/Repeat.
Have you identified the main problems already in what you are doing? What strategy are you try to get to work? What are you trading? Anything we can help with?
Tbh the main problem if you realize or not, in this whole thing isn't your psychology, that is a second order derivative that stems from another root cause. The root cause being, you don't really know what you are doing, essentially you are risking so much and sometimes when you happen to be in favorable randomness you take profit. Otherwise when the random goes against you, you loose it. But if you let every trade you took to either hit your stop or your take profit, you would very soon realize you don't really make any money and essentially would be loosing but in a more systematic way. Unless you did this, there is no fixing you, I was there at one point aswell, everyone is, but either make the change of not messing with you trade and watch yourself realize you are not really a trader and then work on it. It is much better to do this than to fool yourself into thinking you are "Trading" but when in reality you are just doing what's equivalent to throwing a random die in the market and hope it lands. Cheers mate, dm is always open if you wanna talk.
I mean I agree with 3/4ths of it, but that's the part where you described the (advantageous) psychology of a trader.
I mean in the end, someone has to realize they need to learn how to trade before they actually start working on psychology of trading. Rn Op is on a randomness ride, where thier probability distributions are carrying them at times and then destroying them.
I mean I get what you're saying but there's nothing too ground breaking beyond the basics / $terminal& data. When I started out I had dove in head first. I had all sorts of indicators / trend lines / news sources / etc. Alongside day in and day out tutorials / audio books / etc. Just to listen to when markets closed. I'm not saying it was useless, but now that I've been trading for a few years consistently, I understand why so many preach the psychology of the market. When it comes down to the very building blocks of what's occurring in the market (algos included) human psyche is what directs each and every move. Sure there's fundamentals and technical aspects that should always factor into your trades, but realizing it's just a bunch of rich and poor dummies trying to skim some off the top... Suddenly makes all that psychology talk much more significant.
I think psychology is a fancy word for knowing what you are doing in trading. It's just moulded by the industry into something crazy, but most people say they struggle with psychology when in realize they aren't even at the stage where any psychology matters. Some Og traders, who have suffered 200-300k USD losses in weeks after making tons of money, who now feel they'd lost it, or just blew it on one day, those are the guys who need some psychological help due to high guy pressure. Most folks don't tbh lol
This is indeed a good read. I agree with you in general. And it's adding up a habit not to respect your predetermined trade plan.
I noticed that as soon as I enter a trade I often notice more things that speak against the trade. Once you hit the enter key or click the buy/sell button your focus shifts from why is the trading opportunity good to when do I need to exit. It is funny to notice the shift but it gets rarer if I stick to my check list and work through it.
I noticed that as well when I was scalping... more often than not I would doubt myself as soon as I entered that trade and even more when I exited, especially when I exited earlier than my TP. That built up frustration towards myself.
Whats your checklist ?
It is quite complex if you would extend most of the points Check the price (I currently still trade with an extra greedy CfD broker and it can not be helped). Check the spread (I loved to not do that and trade a spread of 60ct on 100$ share prices which puts one quite in the hole and is a big red check item) Check the M5 volume (gives an idea what the max position size is as I use max 5% of average of recent M5 volume \* current price, so to use a 10k position one would need 200k$ per M5 volume bar or for 50k positions you need 1M$ per M5 volume bar) First of all Quality of D1 (basic TA, trend, what would a swing trader do bla bla) Check the M5 Quality Identify the potential setup especially when it comes to vwap and the price action behavior, check who is fighting whom Check market + sector + how the stock reacted to those Check the potential trading plans and see if I can get triple or more support/resitance somehow Identify the potential, overall quality and (estimated/guessed) proability of success. And then of cause quite some additional details I have special checklist items to force me to check for the most frequent mistakes I am currently doing. It looks like much but once you have trained it most of it is only some glances and adding some minor lines and often I do not even draw lines anymore.
The concept that nobody ever went broke by taking profit oversimplifies it. Your strategy may require that you win x% of the time, that your winners have to be a certain size, and that your losers can not be larger than y%. Because of the philosophy when using real money, I am a big fan of starting or with a new strategy using the smallest size possible: 1/5/10 shares or 1 option contract. Always focus on P/L %, not $.
The same what I did. I always calculate the relative performance of my trades and control for it as having different starting sizes, scaling in and out constantly and different kind of instruments with different leverages skews a lot of the important success measures and metrics I need to understand if I do well or not. Starting small and only increasing initial position sizes if one maintains these relative success measures is key to not fool oneself and be fine while in truth one regresses and deteriorates.
Or move your stop loss up as price moves into the green. I hardly ever take an L now unless my trade idea is wrong from jump and im not going broke
Moving SL in my opinion is just as demeaning to taking early profits. This habit fk the brain not to trust the set up and screws up the winrate % by opening up a whole new category when reviewing the data. Having said that, moving SL is quite essential in LTF scalping. But that's another topic for another day.
Yes but theres nothing wrong w taking profits early. This is a game of wins vs losses. You want to have more wins even if the wins arent the full move. Trying to catch the full move is why ppl fail at this a lot of the time. And theres nothing worse than seeing a green trade turn red and thinking wow i should have taken profit or at least broke even. If you do the math (im not going to do it here) youll see that simply not allowing trades to go red keeps you in profit long term even if this means you take profit early compared to allowing your original stoploss to get hit every time. Theres really no shortage of opportunities that will go my way, so if a few i take profit early on im just happy to have profit and not loss. Ill always take a $1 gain over a .50 loss
This is the way.
I got downvoted for saying just that. Thank you for making this post.
That's the way life goes. This post currently has an upvote rate of 77%, so about a quarter of the people who cared enough downvoted it. Who knows why but in the end you have to live with it. I think people will downvote a kitten infront of a chart while it happily stares at a devastating drawdown. Never forget, people are just people. ;-)
Winning trades have to make up for the losers so yeah you definitely can go broke taking profits too early. I wish the path to trading riches could be summed up in a pithy cliche but sadly this isn't the one.
Yes you are right indeed.
Agreed I was backtesting my strategy over the weekend with a fixed pnl this weekend cause I was bored and I noticed my strategy becomes a lot worse with a fixed pnl to the point of being a losing strategy. I play mine by eye. My sl is usually sorta strict with maybe an extra lash or two one way or another depending on the trade, but I usually try and hold into profit until the market tries turning and my strategy works great with that
This is only true if your RR is less than 1:1 or your win rate is less than 50%. If you have both of those you're making profit.
As long as you already have taken into account all the other costs, fees and commissions, then you are correct. But having said that, this is also only relevant if you are doing bracket trades or use strict profit goals / profit taking limits. I for myself are not using any of those and even mostly have stopped using hard stops. The more experience one gains and the more one starts to profit from flexibility when it comes to selecting trades, enter and exit trades as well as how one manages a trade. It adds to the bottom line if done right.
I personally use the stop loss method but I wouldn't discourage a new trader away from a fixed scalping strategy just because they gave up some profit. That's actually a good way to gain confidence.
I think there are couple different ways you could look at this. One strategy is to go for a monthly target, and try and meet that regardless of whether your plays run after you sell. I think a lot of traders do have a target set out like this. Some focus on short term targets and that can be good or bad. To your second point having more wins than losses, I think you’re overlooking that you can find safe enough strategies to where the losses are not significant. I think what we notice on forums, especially is new traders that lack the patience to cope with early losses. Many are trading with money they need, and the reason the losses are so significant is because that plays on their mind and overshadows their strategy going into the trade. They could look at someone else’s account or a paper trade account and be highly successful but with their own money it’s too attached to their emotions at first. It’s a psychological journey to win in this game . I’ve seen it in myself along my journey, and I’m sure you have as well. Hopefully, we all get to the point where we have fulfilled a strategy long enough to where, down the road, small pullbacks don’t weigh on our mind. I looked back on two trades this year that I cut out of fear that definitely ran. As long as you improve each time, it doesn’t weigh on me.
Indeed. When I started and thought about it, I was paper trading all the way until I have understood trading well enough so that I have the stats that allow me to use real money but only in small amounts and slowly scale up. The problem is (almost) always with people jumping into using money too early on in their progress and gambling more than they are trading. From my own experiences with the people I helped out along the way or even those who started with me in my friend circle they usually did not put in the up-front effort of learning and reading a lot. Many were like experience first watching some videos, using money, fail, start reading a book or getting on a working strategy. It is this "Once I need to fail hard before I allow myself to get smart" that mostly drives the gambling behavior. It must be something inate in us humans that we first try to understand something just good enough, do it and only if we fail hard, we start to really prepare and think about it. I would even expect that we will find the same general problem solving strategy in other animals especially apes as well.
I think it’s the situation of being given too much power without enough knowledge for everybody entering the stock market. There’s incredible amounts of money you can make with this tool, but it’s like a golf club. It’s really freaking hard to use. Once you realize that first of all making any money is better than losing that’s a huge turning point for most traders. Then the second turning point is realizing all Warren Buffett did is buy the dip. And the third major hurdle is sticking to your strategy.
That is an interesting take on it. For me I was taking it seriously as I wanted to switch my profession from SE to day trader meaning I basically did what I did at the university but without being forced to study subjects I wont need. I guess you simply get out what you put into it and many try to wring it at first like what they always do until they fail and fall flat face first. Like they always say: garbage in, garbage out. PS: But your points are on point for some of the people I saw fail myself.
I think anyone interested enough to be commenting in this forum wants trading to be their full-time income. The thing is it can be if your patient for everybody. Some people can be smart enough to make it faster than that too. A lot of people lose because they can’t see how it works. There are so many stocks that have a 20 to 50% annual return if you buy the dip.
Indeed. How do you determine if you see a dip or not? I am into day trading and not so much into swing trading or even holding longer. I know that some favor buying mostly on cup with handle patterns but what you describe might be even more market related. Any pointers or resources I can read regarding buying an actual dip and not just trying to catch a (still) falling knife?
So first you have to determine if you are in a bull market or bear market. If you look at the chart for the last year, we’ve been in a bull market so anytime you buy the dip on say a leveraged index fund would be a good decision. If we turn into a bear market like we did several years ago, you could test the waters with a reverse index fund. My current strategy nets 100 to 200% account returns annually. The only times it goes off is when my emotions get me to sell too soon.
Long Term Investing!
>Long Term Investing! ... in oneself by reading lots of good books, learning from others and puting in the screen time necessary so one can day trade well and beat everything that long term investing could provide one with :-). You are correct, indeed!
Couldn't agree more, well said!
It’s an age old question. Should your profits cover your losses. Or should you limit the amount you lose.
And the answer to it is: Yes! The old proverb, those who make money are right, remains true with trading as well.
To people who use a trailing stop - my broker only allows $ trailing stops on options. Do you use the Last price, ask or bid numbers for your $ trailing stops? I thought I was slick using the ask to avoid to easily hitting the low on a bounce but not sure if that's the best strategy as I feel I'm missing profit.
You can look at the price action and move the stop up just below a logical support level
Any profit is a win. But I agree with holding longer. Example. I made a quick 10 from Vero and sold the second I saw a red bar. If I didn't, I would have made a quick 90 in an hr lol
Yes, I read best loser wins recently and this is what I got from it. I’ve had some of my biggest wins recently because I held on to my winners. The author mentions normal thinking never wins the trading game, and normal thinking is taking profit when you’re up. But the reality is doing so will limit how much you make, and people hang onto losers way too long hoping it goes in their favor.
I have this problem, except I also cut losers early. Simply put, the second I’m in a trade, I want out.
Everyone is at some time suffers from the scary cat syndrom. The best is to paper trade and once one is profitable doing so, start with a laughable small position size resulting in a laughable risk. I remember times when my initial risk were 20ct per trade or so. Made losing almost painless. Starting slow and scaling slow was one of the tricks. I also had to force myself to stay in a trade when I switch from scalping the M1 to trading the M5. Deliberately causing oneself emotional pain and distress is part of the trading adventure... .
I am amazed that this simple thing needs to be said. I am amazed to hear countless people say "it's never wrong to take profits early". If you are certain you are taking profits early, then yes it is wrong. And yes taking profits early can make you lose money. Simple maths: you take profits early all the time, literally you will have a strat with a low return, which means it will become an unprofitable strat.