I trade equities, and one problem I've been having is early exits. When I analyze my trades, all of them would have netted me about $500 on 1K shares, but since I exit too early (within 2-4 minutes), my profit is nothing to write home about, and sometimes I even take a loss on a good setup which would have been profitable had I held on for a few more minutes. I'm hoping some of the experts here went through a similar dilemma when they started, and can provide with some information on how to deal with this problem. Should I just enter my position with a trailing stop, and only exit when my profit target gets hit or the stop gets hit? Any help would be appreciated. If it helps, I can post the trades I took this morning for further analysis. Thanks. -FastTrader
Yes, always use a trailing stop. And don´t set any target for your profit. Let the market decide. Cut your losses, not your winners. Always take your losses quickly, but your profits slow. Good luck!
In addition to fixing the issue of taking the dough too quickly. It might also simply say somthing as to what kind of tendencies you have... are you even quicker to cut losers?.....maybe your good at tight scalps
I guess it depends on the trader, but I would say just the opposite. Set a target for your profits. For example, if you're risking a $100 on a trade and the market gives you $300 back, (3-1 ratio) take it, and then start looking for another trade. Every long isn't going to the moon, and every short isn't going down the sewer.
OVERtheLINE, yes I'm very quick at cutting losses, but sometimes too quick. What I mean by that is, sometimes I will cut a loss too quickly and if had held on, it would have turned into a profit.
Absolutely agree. Whether the time frame is minutes or days, the object is hitting a target and moving on to the next trade.
I trade SPY using breakouts out of consolidation patterns within the context of a trend on the 1 minute chart. I use super tight stops, therefor, I have many very small losses. Given that, my methodology is dependant on 2 to 3 large wins per week. I use a 2 bar trailing stop (1 minute chart), and once I get $.30 in profit, I tighten it to a 1 bar trailing stop. Sometimes I get stopped out to soon, sometimes I give back to much profit, and sometimes I capture monster moves. I think the key is to do the same thing each time in order to determine if your money management method is viable. My method works for me because I hate getting out of a trade only to see it turn into a monster move. Some traders probably hate seeing a small win turn into breakeven or a small loss. Good Luck
If you cut you`re losses quickly and take gains to fast the problem lies in confidence of the trading system. You should have you`re tgt`s (upside and downside) set before the trade is taken. Once the trade is on let the mkt come to you........it feels so sweet. Even when you lose you can say to yourself "self, I followed the rules..thats all I can do"