Lets put it this way, I have long term investments from 20 - 30 years ago...still own them because they are for my retirement...the goal of the investments on Day 1. In contrast, I'm a day trader...completely different goal. I don't hold positions overnight. Yet, if I did hold a position overnight into the next day, next week or next month that have nothing to do with "investing"... They have short term profit targets in comparison to an investment. Therefore, it really does make a difference and to the IRS too and a difference to family members if something were to happen to me. wrbtrader
So is that your objective, to make a profit. If you have a profit now, objective achieved. Market is controlled by fear & greed. Are you afraid or greedy? Remember Warren's rule to be “fearful when others are greedy, and greedy when others are fearful.”
I never trade as a person, all my trades are sent via APIs so I force the system to comply with what was designed in the first place. Back in the day (about 3 yeas ago) when I was sitting down in front of the desk I found myself in many situations like the one you are describing, if you have to make a decision every single time you have to take a profit, you will never be right. You might be right, out of luck, but if you look back at the market you will always find a way to challenge the decision that made you close that trade. For that reason you must have an exit point regardless of how you feel at that moment, if you are able to remove yourself from the trade you are following a system like it should be. If you listen to experienced traders, that have been trading much longer than I did, they all point to "discipline" in taking profits and loses. That is no more than a level that has been set way before the trade was live, and they always stick to it. If you read anything about the famous "Turtle traders" they pointed out many times how they felt when a massive gain came their way, it is a good read if you have the time. So asking the question of "what should I do if I see that I am making profit" is a sign of an incomplete plan. A plan that is not complete have an element of luck in it and that can backfire easily against you. Your entries and exits have to be defined before you enter the trade, exactly for that reason, to avoid including your feelings in the trade and to stop the chances for you to make a mistake.
Good point @deaddog, clearly it's not only a question of making some profit but of making appropriate profit or a profit in line with my expectations and clearly with the invested capital
It helps to have a plan. I was running 3 of my 5 strategies yesterday: 2 are intra-day and 1 is long-term. The long-term strategy is a Dow long play, with pyramiding so this will run until all the positions are stopped out. Although the index has fallen back from its high, I'm not going to interfere with this. The intra-day plays were split - momentum trend-following trades on the m15 time-frame: these have a trailing stop timed plays on the London session - these don't have stops: they are entered just before the London open and I close them around the London close regardless of price. This gives me a spread of exposure to both positive and negative risk.
@angrytrader very good post, thank you for taking the time to write it. I have no written rules but have learned over time what works and what doesn't. I know I should let profits run but sometimes I wonder if I could profit from only part of the ups and downs I would be so much more profitable. So in the end today I tend to let profits run with no clear exit plan or strategy and often exit only on hitting my trailing stops but when I do I'm always somehow unsatisfied.
It sounds like you need to backtest your trading in order to find your best plan. Look for software that allows you to replay markets candle by candle, then you can see what would have happened if you were trading at that time. That will help you to refine your feelings about your trading.
Yes, I download datasets for the market that I am going to trade. They normally come in candles (csv data). I run a bit of code on top of it just to get a report of what should do with that data, there I can identify/adjust parameters and rules. Then I run it for a couple of months in a demo account to get the broker input. There I fix any error or exceptions that might come with the API interaction. Last step is the live account if all the steps are coming ok. By the time you get to the live account your rules and parameters are very well defined.