Never let a profit turn into a loss. (Good or bad advice)?

Discussion in 'Trading' started by gifropan, Jan 25, 2010.

  1. Never let a profit turn into a loss. On the face of it, this looks like very sound advice. However I find quite often adhering to this rule costs me money although I am right about the direction of the market. Here is a scenario as an example.

    Go long at 37 stop at 31 profit target 47
    market gets to 42 move stop to 37
    Market comes back stopped out at break even
    market makes new high, buy at 43 stop at 37 profit target 53
    market makes 48, move stop to 43, get stopped out then market continues to make another new high.

    This can happen a number of times so that I end up buying the market higher and higher. The market moves way beyond my original profit target but never the less I close trades at break even a number of times until the last one gets stopped out with a loss.

    Is there something wrong with this supposedly golden rule of trading or am I doing something very wrong. I, obviously, am since I find myself very often on the right side of the market and still end up loosing money.

    Can anyone tell me where I am going wrong

  2. you'll receive 10 different answers here and most likely no one will address the key point.

    trade less and you will win more

    dont move the SL or PTs around

    dont second guess the market

    dont change your outlook for the trade based on news flash, opinions or any other external input

    in trading <b> less is more </b>

    my 2c
  3. The Golden Rule of trading is "keep losses small".

    As for "never letting a profit turn into a loss"... well, that depends upon how big of a profit you're talking about.
  4. 50_luma


    the number of times being right or wrong doesn't mean you will end up profitable in the long term,

    if you have very tight stops and no profit target, you will end up being wrong every time except for the one trade that will work, and if you have no stop loss and 1 tick price target you will be always right, except for the one trade that will take your account down to 0

    to me it seems better to require any trade to be profitable to hold as opposed to holding or doubling down until breakeven, but money management itself won't make your trading profitable in the long run, you will need something else
  5. 1) It's easier said than done.
    2) Your stop loss and profit target prices seem to be arbitrary. You may not be taking volatility and trend into account with those prices.
    3) You could initiate the trade with a smaller profit objective and then increase it as the market moves your way in order to take advantage of quick rallies and move your sell stop at the same time. You could get back in the trade on a dip if the market is choppy.
    4) You may be better suited to quicker turnover in your trades.
    5) To trade for "larger" profits is never easy, even in a strongly trending market. :)
  6. ammo


    its very hard to trade with stops,if you are getting chopped ,draw trendlines on a smaller timeframe,use above and below tl's for stops, edit, try using 2 mrkts, es and djt or ym or nq, watching supp/res on several will help you enter and exit with more confidence (knowledge is power)
  7. Since you never know
    Where price will go,
    Scaling out
    Is what the game's about.
  8. Over thousands of trades, it doesn't matter what happens in one trade, so trying to maximize your win rate is irrelevant. The same for scaling in and out -- that's about maximizing win rate, which doesn't matter. Scaling out of a position between 30 and 40 is the same as selling at 35, even if it appeals to your psychological weakness for winning trades.

    The real issue is not wins or losses, but selling losers and holding onto winners. That's why scaling out makes no sense - instead you should be pyramiding into winners and selling when the trend changes or your stop is hit.
  9. I'm relatively new to trading with ~500 trades in the past year, so I'm certainly not speaking as an expert.

    But personally speaking, I've had many, many winners turn into losers. If I had taken the easy profits on each of those positions, I would be a lot better off.

    And to be honest, few of those winners-to-losers ever turned into mega winners where I was kicking myself afterwards. So it seems like taking the quick profit is the best course of action, at least for me and my level of experience.

    Obviously setting targets and managing stops are difficult things to master in trading and both require experience to learn. So you might as well collect your small profits along the way while gaining your experience. It will make the apprenticeship a lot less painful.
  10. Pyramiding into winners is the tactic of choice for roller coaster enthusiasts. It also assumes an acceptable R:R at time of pyramid entry that can only be supported with testing rather than with blanket statements. Scaling out, on the other hand, is the simple recognition, all else being equal, that uncertainty exists and can be moderated. Among generally profitable traders, I am guessing that there is considerably greater variability in performance among those who pyramid as compared to those who scale out. Personally, I favor consistency. Certainly pyramiding is more exciting.
    #10     Jan 25, 2010