Riding winning positions (intraday)

I've been a fulltime equities trader for over 5 years but I have always had trouble hanging onto winning positions. I daytrade so no matter what I close out my positions before the end of the day. It is so frustrating to book a .25 profit and watch your stock rip up another buck. I just have a terrible problem of constantly wanting to hear the cash register ring...

Can anyone offer any advice on how to hang onto these winners? If I would just increase my holdtime on my winners my profits would be greatly increased. Why is holding on so difficult?

-ListedGuru

 

They might also disappear entirely. You are the only one who can answer your question, by backtesting and forward-testing your plan, whatever that may be.

 

There are any number of reasons "why" it is difficult to hold on.... and while they are probably interesting to discuss.... if someone offered you a choice between that discussion and one on how to hold on longer, I bet you would choose the latter.

Does this happen a lot? Or does it just "seem" like it happens a lot? It might not really happen all that much, but leaving a buck on the table is so dramatic that it feels as if it happens "all the time!"

And the next question I would ask is what criteria are you using for an exit. Would it help your overall profits to loosen it up a bit? Or would something altogether new be better?

This is a very good and common question that most traders have regardless of the time frame except for scalpers.

 

i had the same dillemma --

i started setting targets and stops BEFORE putting on the trade.

then the problem was solved.

 

I have only been trading for about 5 months, but my method works for me. I ride my winners until it tells me to get out.
I enter the trade with about 500 shares, just to test the water. If it goes against me, I can get out fairly easily. If the stock is moving, and showing directional strength, I size in, building a position of up to 5000 shares. As it moves throughout the day, I keep a trading base of about 200 shares, selling onthe surges and buying on the dips. I watch the prints very carefully, looking for any signs that the buying or selling had dryed up. Sometimes I'll test it with a market order for 500 shares, just to see how it is taken.. If there is a lag in a 500 share sell order, I know that the buying is starting to slow, and I'm looking for the door. Vice versa for a short position.
While this works for me, I can't say it will work for you, as I use many indicators to make my decisions.

Good Luck.

 

I would say exit on tech analysis only, let the market tell you where it is going and when it gets there.

 

I thought 5 years of trading should have already taught you how to take the pain. Com'on leaving doughts on the table is not a big deal!!!

One other thing is as long as the stock is on the up trend, you will always sold too early, no one can find the top consistenly, once in a while you might get lucky caught the high, but, if you trade a lot, leaving money on the table is just the fact of the life.

 

"Riding" a winning position requires you to probably be more flexible on your trading time frame (holding period). That's what makes it more difficult. You must change your time frame and target accordingly in real time as the trade unfolds. That's really tough because no one can actually tell you what time frame to trade - it depends on your personality, on the goals you have and your profit factor in different time frames. You HAVE to stick to your most profitable time frame - the one you are most comfortable trading, where you feel you can "anticipate" what will happen "before" it happens.

We all have some perception of what is going to happen after some certain period of time (~time frame) - in a second, minute, 5 minutes,...hours, days, weeks..etc. But we must "bet" only on the shortest possible time frame, where we have an "edge". In your case, you want to increase your typical time frame and "hold longer". I do that very often in fact. It requires you to reevaluate your exit strategy, focus on the bigger patterns, perhaps loosen your stops or choose a longer MA line to see the bigger picture. The trade-off is that you will lose some of your "edge".

I guess this is a very discretionary approach to trading because it actually changes the last variable of your trading strategy - the holding period (the other being the win/loss ratio and the avg.win/avg.loss ratio).

By the way the market will dictate what is the tradable time frame (trend) at the moment - you must try to extract money from the most tradable trend without losing your "edge". Again being flexible will "ring the cash register" more often

 

Listedguru:

You might consider addressing this in phases if you’re a trend follower:

Phase I. Set a price target and decide that you won’t take profits unless the target has hit. You’ve presumably set your stop loss – so you’ve taken care of the potential loss part of the trade. Now you can just focus on the management of the profit part of the trade. So once you’re in, the only way you’ll exit is either the stop-loss is hit or your profit target is hit or at the end of the trading day when you’ll go flat anyway. This way, you get yourself used to “holding” a position until any one of the 3 exit rules trigger you to “let go” of it.

Phase II. Still setting your profit target, now use a trailing stop once prices has moved X points/ticks in your favor. This way, you not only get to exercise holding your profitable position, but also manage to reduce your risk at the same time so that if the market should turn around and reverse on you before reaching your target, your loss is further reduced.

Phase III. Again, using trailing stop, but this time let the gates remain open even when the market reaches your target by NOT taking profits. Instead, let your trailing stop be your sole exit trigger on a profitable position (or until the end of the day, when you must go flat). This is when you milk the market for all it’s got. True, you will not get the absolute high or low of the move before it’s all said and done, but it’ll be better than just .25 over the long run.

Again, this is just one of many mechanical approaches you can try to see if it suits your style. You can experiment with different target and stop/trailing-stop placement strategies as well as scaling in and out of positions.

If the issue is more psychological, like wanting to be “right” then rather than thinking “…what if the market moves against me if I don’t take my profits now?!…”, change your thought to something like: “…what if the trades turns out to be a big winner? Don’t I want to be in it as it happens?” This might help stay your position.

Hope this is of assistance. Good Luck.

Kermit

 

listedguru,

This topic has been extensively discussed before...many many times.

I believe those threads are now in the Psychology Forum or still in the Trading Forum.

You may want to review some of them because they contain some great advice.

I can say this...you aren't going to catch a big winner every trading day nor most of the time.

Also...if your consistently seeing something continue on their way for bigger profits without you...

you have a problem with your exit strategy.

By the way...if your making .25 on average on each trade...

(I know that's not what you said...I'm assuming your profitable and know what your average is...so I just used the only number you gave us)

you are hearing the cash register ring.

More importantly...because you've been doing this for at least 5 years...

Why haven't you increased your position size.

Think about it...lets say you were trading the ES and consistently making an average of .75 points per trade...

to only watch it move another 1.50 points on average after the .75 where you exited...

Why not increase your position size (not recommend for beginners) to compensate for those missed profits if your satisfyied (not willing to change) your exit strategy???

My point is this...hopefully your documenting your trading very carefully and doing some sort'uv number analysis...

to know the average movement of the trend after you exit your positions and then compensate via increasing your position size.

However...the above only works if you have a successful trade methodology in the first place...most likely since you've been at it for so long as a fulltime trader.

Last of all...if you want good advice that your seeking...advice about your method of exiting trades...

your going to need to discuss your exit strategy...

you know...all that trade management stuff that occurs after your entry.

Hopefully you'll follow up and talk about specifics in your exit strategy and/or post some chart examples of problem trades your talking about...

this will benefit other traders in similar situation besides just you.

NihabaAshi