How do you manage LOSING trades?

I thought it'd be interesting if we share how we manage trades that are losing money.

I find that managing losing trades is a lot more difficult than winning trades.

For me, what I do is look to scratch the trade once the loss equals 50% of my risked capital. For example, if I am risking $2 per share, once the stock moves $1 or more below my entry price (in the case of being long the stock), I will then look to exit at my entry price for a scratch.

It's pretty simple, but I believe I need other exit criteria to lighten up on a losing position.

Jeff Cooper has written/said that he closes out all losing positions at the end of the day, and only takes home winners. That's something I've been thinking about doing as well.

I look forward to hearing how you manage your losers.

-- ITZ

 

If your stop is $2.00(in ur example) and u didnt get stoped , why would you only try to scratch; if it moved against you $1.00...I dont know your time frame....is this what u normally do or was it a reaction to market conditions at the time???

in other words....it didnt hit ur stop and now its moving in your direction...

 

That was just an arbitrary example of how I would determine WHEN to scratch a losing trade. I usually set my stop point at where it is clear and definite that the trade has failed.

Once I lose 1/2 my risk, it's likely (but not guaranteed) that the trade will not work for me.

Also, from an intuitive perspective, the farther a stock moves against you, the less likely it will go back to the entry point.

So for me, once I lose 1/2 the risk, I'd rather scratch a losing trade for no gain/no loss, than to hold it until it hits my stop point, where I will take a loss for sure.

 

but IMO, it is not a losing trade.......it didnt hit ur stop and it is now moving in the direction you intended it to go.....why shoot for a scratch??? or why get out???

 

See my previous reply, which I had edited.

 

ElCubano,

I used to leave my initial stop in place and wait, but I found that it got hit way too often. Then I focused on the word initial. If the trade doesn't go my way very quickly, or goes my way a bit and turns around, I start looking to exit before it hits my stop, hopefully at breakeven or better. Even when it does go my way, I start to move the stop closer as soon as possible.

I exit or hold based on what the price action on the chart is telling me. The stop is just a safety measure in case there are problems with my data, charting platform, etc., or in case I freeze up and fail to exit when I should.

Not that I have "arrived" yet as a trader, but this has helped my bottom line quite a bit.

 

All I do is use key pivot points and targets. When a target is neared, I move the stop towards the entry or a tight trial, to maintain gains. Prior to this, I enter near key levels and place the stop just below that key entry level.

It works for me and 5 times better than just using a set parameter or instant trailing stop.....

Been trading for over 8 years, successfully