Managing Your Losses Or Winners?...

Discussion in 'Trading' started by rossmedia, Oct 11, 2003.

  1. We've all heard "cut your losses and let your winners run"..while this is conceptually true there is a bit missing from this cliche. I, like many of you, have had a position that has been substantially in the profit and under the banner of letting the winner run have seen it turn on me never to return. I have notice over the last few years that 9 out of 10 days I am up at some point in the day, sometimes that net profit is $100 sometimes $1000 or whatever. Looking back, if I had taken all profits at the time the market gave them to me my account would be..well lets say it would be nice. So I've been thinking..maybe the phrase should read "cut your losses and book your winners"

    Basically, a winning position will be a losing one, its just a matter of time.
    If someone gave me a choice between taking 100k in cash now or wait until tmr and I could possibly get 1mil..I'd take the now cash. "possible" cash is what keeps the lottery in business, as traders we must take the now money if we are to build success onto success. The compounding of which will make one very successful over time.

    Second to letting you losses run, letting your winners run can kill your acct. Seems odd but very true, the winning position, even for the most unemotional trader tends to create an emotional haze that if only for a moment can delay reaction time needed to prevent a winning trade from becoming a losing one. Bottom line, if you win the lottery take the lump sum payment and if you're up for the the profit...
  2. I agree; and my journal shows this in practice. I think booking profits is good, but at the same time; early exits can also limit your acct growth. I always exit early and I think it's simply because I love to book profits. I just wanna hear the cash register ring over and over; all day long :D

  3. fast trader you're right, early exits can limit your acct growth but in my estimation aiming for the torso is wiser than aiming for the head. If my acct is growing nicely I can't really concern myself with trying to sqeeze out every dime, that will always get you.
  4. 3 yrs had been letting winning weeks turn into losing weeks

    and letting those losing weeks get out of hand ....

    3 yrs ago I had a system of trading that worked so well

    that I did not have to bother thinking about losing weeks

    my only 2 losing weeks that yr were on errors.

  5. to get from trader maxims, to trader actions, takes a lot of hard work and practice.
  6. dbphoenix


    Sounds like you're taking an all-or-none approach. If you scale in and scale out, the pressure to capture every cent is off. On the other hand, if you're still in the learning mode and trading the minimum, your goal should be consistency and the ability to trade your system flawlessly, not make every possible penny. Once you get that down, deciding how much profit to take and when to take it is a problem that most traders would just love to have.
  7. .
  8. No, Im not the all or none type just the go for what you know type. I believe in scaling in and out, I'm just saying the highest percentage play is to take what you have when you have it, that is the surest way to extend your trading life. One cliche is profoundly true.."no one ever went broke taking net profit." Been trading for a few years now and have just concluded that now money is better than the money that might be around the corner.
  9. I think that managing wins depends on your trading style/method/system.

    I think that everyone agrees on cutting the losses.

    So what do you do about the wins.

    Well, several things.
    First of all, a lot of systems depend on the home-run profit. The accounts show +, - fluctations until the big home-run! In that situation, you have to let your winners ride (and possibly turn them into losses) because then you will miss your home-run.

    Other systems, which are based on, to continue using the baseball analogy, depend on many three base hits. In these systems the wins also have to have room to run, however missing one is not terrible, since it is not dependant on the one big one

    In most systems, all winners need some room to run due to commission (which limits trading oportunities, in my opinnion).

    However, for day-trading systems, such as scalping and flipping the winners do not have be held at all, and all profit is good.

    Therefore, the answer to win management is "it depends"

    Look at your trading methodology and see where it fits in the above.

    Hope this helped
  10. I think that cutting losers is a good idea, while a better idea is not to buy one.

    Of course we can't know for sure what the future is going to be, but we can learn from it's past behavior - right? Just like some people usually act a certain way, you can anticipate their actions. You don't know for *certain*, but you can have an educated guess.

    Winners are good when they are winning, but winning is also relative. If there is another opportunity to do *better*, then you are obliged to switch to the new stock. Unless you're goal is to simply own a particular stock profitably.

    You can be successful or you can be optimally successful. To be optimally successfully, to take full advantage of a given situation, requires *optimization*. Optimizations are generally evolved through experience, but that does not mean that you can't take advantage of anothers evolution. Thats how we all got to where we are now, isn't it? You must evolve and learn from others to perform optimally.

    Often what is most important to people is *not* money, that is a *good* sign. It also usually cripples their ability to be optimally successful. Refusal to learn from others is rarely a trait of the most successful people.

    So only holding advancing stocks would seem the way to go.

    #10     Oct 12, 2003