there is no one answer as metoxx points out. some people do add to winners, but I guess the shorter the time frame the more difficult to do this (or unwise). there are all kind of ways. but the trouble is somewhere else for you : you are stuck at break even. first and foremost, congratulations. few have the privilege to be break even (most do lose). and break even is a very tough spot : hard to change anything without risking to tilt toward losing again. basically you can't trade against yourself (which is, however, the best way to become profitable.. trade against yourself, not only your trades but your mental state). break even is the most frustrating trader's state. maybe you can really study you edge, or lack of. did your study all your trades (and I mean all of them) and tried to see the pattern of your losers. because let's face it, when you are break even, you are not far from finally getting what trading is about. when you are break even on a constant basis, you are consistent in your trading. you only miss some weight on your winners. but, typical of this strange line of business, the solution is counter intuitive: you are better of reducing the impact of your losers than trying to increase your winners. concentrate on your losers. if I simplify, not knowing your method, you either have to select tighter stops or, quite counter intuitive, loosen the stops a lot. or maybe, what you need is a change of time frame. maybe you are trying on a time frame too tight for you. not everyone is fit to that. I am not good at very fast trading. but my job is not to be good at that, it is to make money (2 very different things). changing time frame may have a good impact on your losers or winners. again, not knowing your method, I am showing different routes to exit 'break even hell'. tntneo
tntneo, first of all, thank you for your post. you're right that it is frustrating to be in my position. everyone says that the most common trading mistake is being emotional and not stopping the losers. THAT IS NOT MY CASE AT ALL! i could care less about my trades! i am not like that anymore.....that was maybe my first year of trading. when you're not emotional about your trades and you still don't make money lol it gets pretty frustrating indeed. here's a tip for this situation that you mentioned: "some people do add to winners, but I guess the shorter the time frame the more difficult to do this (or unwise)." in this case (a very short time frame), you could start with a full position, but only reduce the position if/as it goes against you...but hold the entire position if it goes your way.
GG there are many ways. but it depends on you. only studying your losers will tell you what to do. what you suggest with starting with full pos and reducing is a possibility. I know some traders who do that because it's hard for them to take a stop. they stop on half and give the trade a chance. but it does not mean it's a lasting solution. for them it's only a way to manage their ego and reluctance to admit being wrong. still it's better than blowing a stop or average down for the wrong reason. the pattern of your losers is trying to tell you something. you did not see it yet, that's all. there is some consistency in your trading and that includes your losers. find it, and work it out, step by step. I can't say more since I don't know what you do. maybe your solution is not with your losers. maybe you just take profits too soon. I only am talking from experience with many methods with me or others : usually the losers are where you can increase your edge. not the winners. tntneo
I'm the first to admit that I'm no expert, but GG, you are very correct in saying that it is very hard. It's very easy to come up with winning trades or winning days; but the hardest part is finding that positive expectancy(EDGE) that you can *CONSISTENTLY* achieve and carry out on a day-to-day, month-to-month, year-to-year basis. Now, your edge can be based on a historically tested rule based system or the edge can be your discretionary intuition. It will be hard to quantify a discretionary trading style in the terms we are speaking of because you would rely on your experience and ability to flow with and trade the markets. You can easily analyze mechanical systems but that does not mean they have better expectancies or results. It sounds to me that you are searching for some rules/system that can give you better than break even because you can't achieve this just by using your discretion and I don't blame you, trading is so easy on the surface but in reality achieving consistency is extremely hard. I'm personally working on both trading systems(T-Bonds and S&P's) and discretionary daytrading(the S&P). It can be done, keep on trying. I wouldn't post how I trade on a message board because I've worked countless hours the last two years working on this but please keep it simple. But I will say the following for trading the S&P or Nasdaq. In my opinion when daytrading these the only thing that matters is PRICE and support and resistance and the ping ponging back and forth or breaking through these price points.
adding is just a new trade. If you can't make money on one lot, you are not going to make it by adding additional lots. If a position moves in your favor, you may feel emboldened to add to it, and it makes a better story afterwards, but mathmatically speaking, it is just another trade. In grains for instance, a big move only comes along once in a while, so it is customary for traders to pile all their profits back into a winning trade. But in daytrading es, a big move comes along about every 5 minutes, so I would be very skeptical of any system which requires adding contracts. Don't let the money management gurus fill your head with mush. There is no way to win without being right either more often or bigger than being wrong. It's a lot easier to guess the direction of the market than it is to devise some plan where you can be wrong and still make money.
Exactly! I was just going to say exactly that. The whole "adding to winners" hype is purely psychological. Phantom of the Pits may THINK his profitability stems from adding to winners, but he really just has a winning system. "Cutting your losses" is a little more relevant, but only in this one regard: You should never get into a situation where you are forced to liquidate although your system would tell you to hang on. In other words, you should never run out of capital.
Nitro, Man, you are wrong....with a 50% win percentage, it is possible to make a substantial amount of money, and its all about $ management. Read Reminisceneces of a Stock Operator if you want to know more about this. The most succesful traders in history often had winning trades approaching the 40% range. But their winners were let run, and their losers were cut short. The difference between letting run and cutting short losers is NOT inherently proportional, yet can be if not done properly. adding is just a new trade. If you can't make money on one lot, you are not going to make it by adding additional lots. If a position moves in your favor, you may feel emboldened to add to it, and it makes a better story afterwards, but mathmatically speaking, it is just another trade. In terms of adding to trades where you arent already winning, and how it 'never'works, LOBSTER, you are wrong, as is Profitseer. Do you know how many times I have been in a trade, and the futures were relatively strong, but people were holding it down. After a quick bidswipe, the stock often moves a few cents after this, and then I get out. Or, when a seller is present, a big bid with ATTN will often stop the selling real fast, while enlarging my position, but turning around the momentum. Use your heads, if you do enough volume you can move stocks, I do it every day. Although it may only be a penny or 2 or 3, it does make a huge difference when I take 9000 shares for 3 pennies instead of eating it for 1. Rinse and Repeat.
I hope you realize how contradictory and ridiculous that statement sounds being that "adding to winners" IS an intregal element of his "system"... That is comparable to saying that many people think The Rams win ball games because of an excellent passing game, but they really just have a great QB and WR's... PEACE and goodtrading, Commisso
>The whole "adding to winners" hype is purely psychological Can be true, but only if you are allowed to trade without tight risk management and exposure management. Usually, the best entries I make are the initial ones. So, I want to ponderate heavily the trade, which means I may reach my max risk allowed, or my max exposure allowed from the start. It often happens that, once the position has run in my way, the particular vehicle will still present great opportunities. So, the gains on this winning position allow me to add. I could not do it on a position showing a 0% gain or a potential loss, or I would exceed my exposure and risk restrictions. If I recall correctly, there is a page in Reminiscences of a SO, why a position showing a profit is better than same position closed and the profit cashed. OHLC
"The whole "adding to winners" hype is purely psychological" That is only true if you don't believe in trends.