This is a really hard one because it's always easier to say with hindsight - I should have held onto that one. My worst fault is that I always hold on to them too long! Only when the trend has changed do I cash it in and sometimes I've given up a significant proportion of the profit. So I'm now practising getting out earlier when it looks like the move up/down is faultering - my reasoning is that I can always re-enter the position if it's apparent the price is going to rise/fall further. And if I miss a some pips on the way it doesn't matter - because I will have profited from the last trade so my money pot is bigger - therefore my trade size is larger - so I'll stand the chance that I'll make back those lost pips with the slightly larger trade size.
very well said! to the OP: you may also want to scan through this recent thread: http://www.elitetrader.com/vb/showthread.php?s=&threadid=78975
I agree. Nothing wrong with booking profits and re-entering a trade if applicable. But, there is one problem with your thought... "so I'll stand the chance that I'll make back those lost pips with the slightly larger trade size." You didn't lose anything!! Trade according to plan, not according to ego. Every completed trade stands on it's own. Good luck to you Osorico
Wow--so many responses--thanks for the help, guys! Yeah, that's the first bit of advice I got regarding this issue (a couple of months ago). It has worked wonders for me, as well as the "two for one" (Dave Landry's term) method described by Pita: Pita's method works awesomely for many of the other traders in the room. ----- I'm still leaving quite a bit on the table--on a regular basis--in spite of these techniques. Basically, I'm trying to evolve from a scalper (five to twenty cents on 1000 shares over a few seconds) to an intraday swing trader ($0.80 to $2.00 on 200 to 500 shares over a few hours). Holding that long while watching price action and order flow is very difficult for a scalper-type like myself. ----- About my system/methodology: I'm kind of divided between two approaches. I originally came from daily swing trading (hold time: 4 days to 2 weeks), trading only by charts. I used fully-automated systems that removed the psychological element of trading. Even now, I am trading the same set-ups, but with options brackets that are set up well in advance and that trigger on their own. I have done exceptionally well by predetermining profit targets and stop loss exits and then by just walking away and letting it do its thing. On the flip side, I am also a full-time scalper-type daytrader having a hard time with all the noise introduced by the hybrid system. Those traders in my firm that have survived the switch to hybrid have all abandoned scalping and gone to intraday swing trading or pairs trading. So, I'm trying to follow (like running from a tsunami)... The problem here appears to be entirely psychological, because I have no problem taking my predetermined losses or 100% of the preplanned profits when trading my fully-automated systems, but plunk me down in front of the screens with the MM/L2 and Open Book, and all of a sudden, I'm getting out way before my anticipated exits OR setting my profit targets far short of the total move. You just helped me realize something: I don't use the charts nearly as much in my daytrading--I'm not really thinking ahead about preplanned profit targets and stop losses when daytrading because I'm almost totally engrossed with order flow. I usually use the next resistance level (going long), set a limit sell at that point, and then watch the order flow as the price wiggles towards that point. Usually, one of three outcomes happens: 1) Price wiggles or drops downward, and I exit with a loss. 2) Price wiggles upward, slows and/or appears weak, and I get out with a tiny profit. Usually, I do manage to save myself from a winner turning into a loser, so this behavior is being regularly reinforced. 3) Price moves upwards, hits my target (with or without scaling out), and continues for a large move. This is the part I'm trying to fix, because these rare long runs are where the real money is made. The puny winners in #2 are canceled out by the losses in #1. ----- This is a very lucky "problem" to have, as all the traders in my firm that have this "fault" do very well. Take it from me (us at this firm), piecing in and out of a larger trend doesn't work well at all. You end up with smaller profits AND higher transaction costs. We've got guys here who make $300 to $500 daily after 100000 shares traded, and we've got guys who make the same amount after only 10000 shares traded. After watching both, I'd much rather go with the intraday swing traders than stay a scalper. ----- So, I guess after all this, the question becomes: what can I practice to improve my "faith" in the intraday charts while still staying focused on order flow in the market maker/Level 2 and Open Book screens to determine buying/selling pressure and when a move "falters?" Is it really a binary choice? Thanks again for all the great responses!
The reason why they are more profitable is because holding on throughout the entire 100% move gives them specific stop-loss and accumulation points, based on the charts. Unless you have specific predetermined profit targets where you exit no matter what, riding a move 100% and then giving back 20-40% before closing out is a VERY profitable strategy. It's one of the basics of successful trading. By allowing the charts to make a "roadmap" for you, you know exactly where the probabilities of support/resistance areas are. You know where to exit if the trend changes (thereby assuring you were in it for 100%), and you also know when to add to a position on a new breakout (telling you it's not yet 100% done). This is simply the old adage of letting your winners run.
I think this is great advice. How many of you can "feel" the change in the order flow, but have it not match the traded price you thought you should have hit or whatever. I think when I feel that "order flow" as the poster put it, I scale out and in much more effectively and in hindsight I did it at pretty good times most of the time. Granted, I have been watching the bid/ask flow for now almost 8 years. So maybe that helps me get a feel...??
although wouldn't one want to exit in a bull trade (long i imagine) when you feel the order flow going "offer". I especially like when I see the bid disappear a few times for a few milliseconds...thats a great signal or confirmation when I am short, and a good time to scale out of a few when long. It's no exact science, but its one of the messages the market can send.
Okay, I've had some time to digest and try your collective advice, and I'm definitely doing better. Having more faith in the order flow's clues as to the overall buying/selling pressure has made all the difference. It was so easy to simply react to the prints and my open P&L rather than feel the flow...