I stopped checking this thread but I came back because I think it's pretty much the same issue I'm talking about in the "size/time risk" thread in the trading section. What I'm attempting to do there is probably not one of your five solutions, just a reactionary impulse that's helping me think things through.
Everyone overestimates profitable positions to some degree, Being aware of this problem is why we counter this bias in our heads...then pull out early as greed switches to fear. In my experience... Stacy
I pull out 1/2 position and let the rest ride up or down, keeps the trade winning if there is a turn around
I think that the problem with trying to finesse it too much is that you will almost always be disappointed. Trying to determine a priori where the best exit is and then seeing the best exit in retrospect will likely lead to ongoing disappointment for the simple reason that you cannot predict the future but you keep on trying anyway. Taking partial profits may seem like a compromise, but only when compared to having full information. However, you never have that full information until after the fact. I think you need to approach trading as a business rather than a game of precognition. I think that taking partial profits has a no-nonsense "actuarial" sensibility to it. Trying to read the markets with the kind of acuity that is required to determine the very best exit points is to enter the touchy/feely realm of the savant or trading god. And that topic has already been covered in another thread.
Just a brief addendum to my last post above. By taking partial profits along the way, you get to express your profundity by attempting to exit "optimally" with the remainder of your position after at least having socked away a portion of the winnings for groceries. In other words, feet on the ground while reaching for the stars.
Well put -- I agree, the sensible solution is probably "in between". I was just trying to see if I could go beyond a band-aid remedy (because they usually never last) and dig a little more into finding where my issue has its source.
From Bob Bright, circa 1978 "When in doubt, do half" "that way you're happy with whatever happens, well, at least "half" happy"... LOL... Don
I think traders need a certain amount of greed to be successful. Too little and you won't reach your potential. Too much and you can destroy yourself financially and otherwise. I remember 20 years ago when I was a broker for Refco one of my friends who sat a couple of desks always from me ran his small trading account up to six figures by trading t-bonds over several months. He was the wonder kid who could do no wrong. One day he got real greedy. Unknown to everyone except himself and a couple of accomplices at the order desk he shorted 100 t-bonds when the market was very bearish-looking. Well soon after that the trade started going against him so he sold another 100. Not wanting to blow out his account he tried to average down another 100 bonds. By the end of the day he was short over 2,000 t-bonds on a day trade!The day he picked to try this stunt turned out to be a key reversal day up! The next morning when his career shot was finally discovered, Refco took him out of the position when he was over $2,000,000.00 in the dinger. Since he had put his house in his wife's name, he had no assets to cover the loss and Refco had to eat it. I never saw him after that but was told he almost got air mailed out the 17th floor window that morning. He was a nice guy and smart, but greed destroyed his career in one day. I never forgot that. It taught me to watch out for that King Kong feeling that makes you think you are invincible. That's the time to be alert. Greed is on of the 7 "Deadly Sins" ( Pride, Sloth, Lust, Greed, Envy, Anger and Gluttony ). Every trader has to know his/her limits and not try to grow too fast for his/her mental ability to adapt to a larger financial self-image. If you grow too fast it can backfire. Each trader's greed limit is different. Some can grow fast and hold their position. Others have to grow slowly or their subconscious will force them to give the money back to conform to their old self.
Illiquid, being able to handle a profit/loss are two of a kind. Getting all excited and pissing your pants when you are in profit is as bad as moving your stop with the price against you. Know your timeframe, know your risk and know your fucking price action, matey.
Your post is about stupidity. You can have an awful lot of greed and ambition, more than most, without being stupid. You have a story about someone who takes a risk way beyond his means. If its anything more .. its a need to lose, to remind himself that ultimately after gain and advantage he should always return to his true inner calling .. to be a loser.