I hear some alegedly better discretionary traders talk about how cutting losses short ie. setting stoplosses is not the right thing to do. They said they rather work the position until it's profitable before getting out. Could some of these traders enlighten me how?
Whoever told you that knows nothing of risk control, but if you want to throw your money away then go ahead.
Take a look at this journal, I think its somewhat relevent to what you are asking... http://www.freewebs.com/mytradingjournal but also notice the size....very small.
"I hear some alegedly better discretionary traders talk about how cutting losses short ie. setting stoplosses is not the right thing to do." -----> Of course. "They said they rather work the position until it's profitable before getting out." ------> Who ever said that? Flexible exit points is one thing, but using one's unrealized P/L situation to determine exit points might be the single most common trading mistake of all. The market never knows or cares at what price you got in.
success, Its actually based on the premise that Futures markets are extremely volatile (when they really do move) that the likelihood of you getting stopped out on even a position that you are right on is extremely high. Thus, most people go in with a set loss point but they scale in and get out when the risk point is hit. A lot of successful traders tend to do this.
it makes sense, if you have enough capital and positioned sized properly. remember, markets never move in one direction forever. one is dealing with an oscillating system, martingale type programs can work( in certain markets at certain times) IF executed properly and knowledgeably. good luck, surfer
Go back and ask those particular traders that said that. If they are ET members...pm or email them. With that said...what do you mean by when you said they work the position ??? Regardless...whenever I hear someone tell me they work their position... It is someone that scales in to their position between a designated price range that was determined prior to entry. I know a few retail and institutional guys that does this as part of their normal methodology. How is this different from Averaging Down... Well...position traders tend to add within a specific range and will do it via adding to a loser or to a winner... Sometimes both in the same trade. Example...lets say your trading YM and you have a high probability indication its going to go up 10800 price area. Yet, you also know that YM is in trouble if it drops below 10650 price area. If YM is sitting around 10725 and you enter a small position of a few contracts while trying to work in a 50 contract position... A position trader will pick a price entry zone between that 10800 and 10650... Maybe doing his/her largest ADD around the 10675 area and his smallest ADD around the 10775 area. Further, those that tend to work their position in are also trading size. In addition, these types of position traders do use stops and tend to be a lot more patient than the typical day trader. In this example...10650 would make a logical stop/loss protection area. Also, I've never heard of a 1 contract trader trying to work his/her trade However, traders that just Average Down without a specific trading plan for such and don't know how to add to a winner... Usually end up as losing traders. Like I mentioned earlier... If you know someone that has said they work their position and your interested in specific details about the method... Best to contact those traders since you already know whom they are. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
Unless you are moving huge size, why not just get used to the idea of getting stopped out and getting right back in? The cost of one round turn spread and commission for this purpose is probably the best money one can spend in trading.