Bungrider, Here's 3 ideas: 1. What has helped me was some systematic desensitization to risk, coupled with aggressive risk management. The best way to achieve that, imo, is to trade very small and gradually build both your confidence and your capital at risk. Ryan Jones' book, The Trading Game, also helped me in this respect, by teaching me good money management. 2. Find and trade systems or mathods that have large profit/loss ratio per trade and/or large ratio of winning/losing trades. They do not tend to be the most profitable ones out there, because they cannot get you many trades or they get you many trades that get little gain, but the experience of trading them is easier to stomach for a beginner - and by that I mean someone in their first 5 years of trading. 3. Now, focusing on the internal/mental aspects of this, I agree with the opinion, already expressed here, that Douglas' zone book is superior, imo, to Kiev's. Good luck!
Since the market should be making your decisions for you based on current activity, I don't see a real problem with the amount of time you hold a trade, perhaps your trade evaluation method. Once you are in a trade, for whatever reason (opening only, momentum, pair trade, whatever), then you must look at all the basics before deciding to get out. Read the tape, evaluate the Prem/Disc, check the group....all the basics....you'll find that the market will actually "scream at you" when to get out. Often times new traders will get out too soon, so we have them graph their entry and exit points, and then show how much more $$ they would have made if they stayed in. When the profits are running longer than the losses, then they are starting to "get it." Don
HUH?? you wrote:"It is even harder if it is mechanical but you do not know why the system is taking the trade. " why?? Hopefully you know why the system did it because you wrote it! If you don't then at least you should have the strategy summarized. That's why it's a BAD BAD idea in general to buy a "black box". From backtesting and forward-testing, it should give you a pretty decent idea of the statistics of your system - how often it wins/loses and and how winners in a row, losers in a row on average,etc. etc. You should be able to understand it in a very intuitive fashion after trading it llive for a little while. And if you ahve tight risk managment you should be OK. trader99
If you want to learn how to ride a position longer, just set a wider stop Seriously, in a position where u have decent open profits but think it could go ultimately higher after some pullbacks, I think the best compromise is to divide the position into 2 parts, and trade around one half while leaving a relatively wide stop on the "core" position (since we're assuming its a profitable position to begin with, the stop on the core half should in most cases be moved up to break-even), with the rule of not buying back the traded half higher than where you sold it. You'll risk missing out on the return ride with a full position after a pullback, but you'll also rule out the worst case scenario of giving back all your open gains. As long as you are comfortable with letting half of the position go if it runs away from you, no matter what actual short-term trading skill you have, you are eliminating the worst-case scenario, while at the same time perhaps generating much more profit than your initial objective for the trade. Ultimately it's the seller's remorse instinct which you're trying to do away with in the long run, so some kind of compromise system where you remove the worst-case scenario (and in most trades the best-case as well) is a decent place to start I think.
Don't sweat it. You have a low pain threshold, and that's good. Do you make money, net-net-net, on a consistent basis? If so, you're in the right place. Trading is all about sizing and risk assessment. Everything else is trivial in the scheme of things.
I've got a very low tolerance for loss, especially when exiting the trade is possible at breakeven or a gain. By letting trades run against, you are 'paying' something to find out if it will turn before you are forced to exit. Many times staying in will prove to have been the better strategy, but how much extra you lose on the bad ones determines the viability of that tactic. Also, you can always GET BACK IN (takes some mental effort) to a prematurely exited trade, but you can't sell at the earlier exit you missed.
WOW...this has turned into a great thread. I'll try to reply to pretty much anything posted above that applies to me- I have an extremely low threshold for pain, although it is getting more controllable and with that I am trading more size and getting better - I have a tight system of rules, and the feeling of letting a loser cost more than it had to is the WORST feeling for me. I hate the feeling of being down or even for the day when I still traded well - but had that one loser that I let go against me way too much and that one trade blew the whole day. On an intraday basis (I think this is the only one that really matters for this topic, since that is the timeframe where losses can be most tightly controlled by the trader - provided no fed cut, bombs, etc...) my profit per share is typically 3-5x what it is for losses (except for those days mentioned above). My winners will usually range from 0.10 - 0.40, and my losers will mostly be scratches (less than 0.05 loss). I am not a system trader - most of my intraday trading is tapereading NYSE, and I am very good at knowing when I'm wrong. I don't have any problems getting back into a trade if it keeps going my way. I love doing that, and I love cutting a losing trade for the sake of ending the pain only to get right back in 30 sec later. Maybe I need to do more scaling. On cheaper stocks that I feel comfortable with this is no problem, but with expensive stocks (>$40) I trade very small share sizes (100-200) and try to pull $20-40 per 100sh on these trades. This is where my problem truly lies. I will cover on a bounce only to watch the original trend continue, and if it does and I can't get back in (if there was no downtick, or I'm just not quick enough to get shares) I'll go nuts when I see missed opportunity - especially when I was there in the first place and I did all the work to put myself in that trade ahead of other traders. Closing that trade and giving it to someone else to run with really really burns my ass. I think it really comes down to this - I get the smaller picture in my head and can't see the bigger picture. For lack of a true intraday example at my fingertips, here's another one which is a very similar problem that I have constantly: Say XYZ is moving down and I see it's about to reverse - say at $34 for simplicity's sake. I get in at 34.10 and ride it up to 34.45 - only there's a big seller at 34.45 so I pass on my shares to some "sucker" (that's what I think they are when I'm selling them the shares at the short-term "top") who's bidding 34.40. I'm happy because I've just made 0.35/share, and now I see the stock moving back down. But it hits 34.30 and there are no sellers, so it reverses, moving up to close strong at 35.50. Over the next few days it moves up to $37. What I forgot during the trade was that the stock NEVER goes below $34, and that instead of BUYING MORE like I should've, I take 0.35 when I could've made an average of a few dollars per share if I had just seen the BIG picture. Sometimes it will occur to me that I'm at a longer term buying opportunity, but I'll make excuses to myself about why I SHOULD NOT buy more and hold it longer (few hours to a few days). Similarly, on pure intraday trades, I'll get shaken out on a tiny bounce and make a small profit while forgetting the big picture - that there was a strong trend behind me that was pushing the stock in my direction. Scaling may not be the best solution - - should I let winning trades pay for losers? - if I'm conviced that the move is over, I'm going to sell ALL my shares (for what I think is the max profit potential).