I have a serious problem holding winning trades for too long. It feels like I get in right at the time a big move is about to happen, and if I don't take that move on the positive side I end up getting knocked out later or the stock collapses. An example is, I bought a stock at 35.20 and was going for at least 36. My strategy told to sell at 35.59 though, which of course was the exact top, I ended up getting stopped out at 34.89. What's annoying is the times I take profits on a great move it ends up going much higher, Like i'll get in on an amazing play and end up selling too early. I don't think moving averages work really, what do you guys do? My current profit taking strategy is to up stop loss after each 10 cents is hit. So if a stock hits 2.20 the new stop loss is 2.19, and sometimes it bags me 50 cents or a few dollars on larger stocks. On microcaps I go by the cent and on larger stocks by the dollar. So on a larger stock each 10 cents that hits a new round number now has a cut 10 cents below the round number on the dollar mark. I mean, in my view any profit is a profit, but it really bugs me to see new traders making 200% on some play where i made 10-30 percent
when the trend breaks, it's time to take profits that's why understanding technical analysis is important
Doesn't it depend on your definition of a trend though? Some trends last 1 minute, some last 10 minutes. Some larger trends last years. That's the thing about technical analyses, everybody has different indicators and time periods, draw a line anywhere you want on a chart and you'll find some type of trend that connects everywhere on all different time frames. To me if I'm buying right when a breakout is happening if I don't sell at the end of that huge move it's usually the top.
It is called acceptance and being content. I scalp ES for 60-70 minutes a day, I nail down extremes very well and often get one tick, after awhile you end up doing thousands of trades, and often five minutes after I am out, I don't even remember the trade I closed out, You just have to separate yourself from the system. I take hypnosis 3-4 times a year to separate myself from the guy who designed the method(me), but when trading the other guy made the system and I am just a guy who get paid so much an hour to do the rules of the system. Eventually everything you wrote is waste of time, so what other people make, you work hard to do it everyday of coming out profitable, that's all the matters. Percentages means nothing, they are for contests or bragging rights, but that doesn't put food on the table or buying a home for the family. Just accept and when you can, add shares or contracts, but do it sensible.
"Holding winners longer" is a matter of setting proper/reasonable stops. There are 2 kinds of "proper sells". (1) Aggressively selling into technical resistance, trying to "nail the top".... and (2) defensively selling apparent breakdown of (perceived) trend. Stops are an art, not a science.
To me, trading is much more of an art ... (rather) than a science. -- you need foresight, and the ability to see all the variables and forces in play in the greater picture. Trading (successfully) is not really something you can do purely mechanically, or using a fixed formula/science.
Actually it is. And best executed with mechanical discipline.... however psychologically difficult it feels.
Exits and stops are a personal matter, there is no perfect way except the one that allows you to be profitable while allowing you to keep peace of mind. My method is unorthodox but it's what I feel at ease with. I scale out during favorable exhuberant moves, never trail the stop as gyrations are part of all kind of trends, many times making you exit, when you should be enterintg; watch profits accumulate over time. Always try to keep a position no matter how much the instrument have run, call it a perpetual hold. ie 100 shares 80 shares 60 shares 50 shares 20 shares 10 shares 6 shares 3 shares 2 shares, you get the idea, enlong it to the best of your abilities.