How do you get good at holding on to winners and hope to get a bigger profit instead of fearing of riding profit into loss?
piece out- simplest way to lock in partial profits, lower anxiety, play w/ the house's money, and participate if continues onto a homerun. can always add back partial shares u pieced out in future consolidations for good risk/reward setup again. recommend van tharpe reading- R mulitples- simple and effective.
It is not you money/profit until the trade is closed. Greed (of wanting more profit) is fighting with fear (of loss or giving back)! You have to determine which one wins. I would take whatever you can when you can. What about close 50% of what ever position you got, take the profit and ride the other 50%?
But Jesse Livermore said you should do the exact opposite of human psychology. You should hope for bigger profit and fear a loss will turn to a even bigger loss. It's easier said than done.
let the winners run. cut your losers short. stop trying to smart out the market, the market couldn't care less about your winning position. just a couple of home runs pay for hundreds of losing trades, if you take out those home runs from your trading records, then you end up most likely with a losing proposition. so let the winners run (period).
How about those trades that are marginally profitable? I mean those when a down day will send you back to the red.
I'm also trying to adapt my trading style to one similar to livermoores - i'm trying to cut my losers as fast as possible and hold winning positions while adding to them. The problem i've been having is adding to my winners, and the whole psychological aspect of really only winning on about 40% of my trades - it seems like i need a lot more discipline to make money with this approach (the discipline to not be afraid to get; then get out of the trade if it isn't working; plus the discipline to hold onto the winner and try to add until my target is hit). I've been getting a nice lead on positions, then when i try to add to the winners i'm adding at the wrong time and getting stopped out for basically a break even trade. One thing i have noticed thats helped is i'll immediately stop myself out or add to the position within the timeframe of the chart i'm trading on....example: if i find a trade setup using a 60minute chart i'll enter the trade; and immediately (a) stop myself out after 60 minutes if the trade isn't working (the next 60 minute candle bar); (b) or i'll add to the position after 60 minutes if the trade seems to be working. Then, if i get stopped out, i'll make myself wait another two bars before i try to re-enter another trade on the same side of the market...example: if i get a long signal on a 15 minute chart i'll get long; if after the first 15 minutes the trade isnt working i'll stop myself out; then force myself to wait another 30 minutes before i'll try to re-enter the market on the long side....this keeps my losers smaller if it looks like the trade will run straight to my stop loss (i'd rather get out proir to my stop if i know the trade isnt working). It also prevents me from chasing the market after i get stopped out - it limits my impulse trades that i use to have after a losing trade and it prevents me from chasing the market. As for adding to the positions i always try to add 1/2 the position size - pyramid trading - livermoore also used it....if my max position size is 10 cars; my initial entry may be 5; then i'll add 3; then 2....then liquidate all 10 on my target; or 9 plus a trailing stop on the last car.
fear of losing is the single most important draining aspect of the trader P&L. the real question you should ask yourself is: do i feel confortable doing the reverse trade? if the answer is no, you're probably making emotional deciosions based on greed and fear. if the answer is yes, then go ahaed and do it. successful trading is all about being confortable with your actions.
ouch. the guy put an end to his life after going bust for the third time. better keep livermoore model at certain distance for your well being.
I find using computer programs to test trading methods eliminates the "sold early and feared of riding profit into loss" thinking. I observe the computer programs showing again and again, using data in some cases 42 years in duration, that simple rules work if I follow them. When I see the same results with many securities and over long periods of time then I find confidence in following the system. One thing that might be happening to you is before selling you might worry that the profit disappears. After selling you might worry that the price rises and you are missing a profit. The overall process is designed to make you worry. When I get the worry feeling I spend time worrying about whatever comes to mind. I figure I need to worry so I do it. I suspect psychological activity influences trading more than anything else and the results can be profitable or unprofitable.