Was wondering if the saying, ânever let a winner turn into a loser 1.) applies to beginners, 2.) If it applies to swing trades, 3.) how much time do you give a trade before you enforce that rule? For swing trades, for example, do you give a trade 1 day? What if it only moves up a fraction? Btw, what I mean by "if it applies to beginners" was that I know beginners should use hard stops (predetermined), but at what point do you lock in a gain and not let it turn into a loser. I would imagine this is sound money management even for a beginner. Any help is greatly appreciated
Well the market isn't "one size fits all" and every approach is different so there is no right answer. I won't leave you hanging though. I personally like to move the stop to at least BE +1 after a Wide Range Body shows up after entry, defined as a body greater than the bodies of the previous 3 intervals. Other times I will trail the stop at each new successive bar low it all depends on context , volatility, how tightly I'm trying to protect profits or reduce risk. "It depends"
======================== [answers] Time stop[stocks, ETFS,cash markets...] is not very important @ all , compared to price; becuse most of the money made professioinaly , is measured by monthly % gain/losss, yearly%... Yes I am aware , some derivative traders use time stops; stocks moving up a tad , on longs, or shorts is fine. Time is not a friend of the lottery trader, time is a friend of the trend, more so than countertrend. For example ,trend/time favors gold / & GLD longs; trend / time favors Citigroup shorts.
I guess the short answer is that it depends on your trading plan. For me my reasoning for placement of trailing stops and initial stops are the same. I believe that if a trade is going to move, then it should move quite quickly. So I use the 60 minute charts to place my stops under the most recent swing low or high and then trail it with that same reasoning. Also I scale out of positions as well. So when there is a significant move on the 60 minute charts, I trend to take profits and trail the rest of my position. It really depends on your own risk tolerance and psyche. like any tactic it works well sometimes or not at all. For example I was stopped out of my gold short just before it began it's precipitous plunge for a $300 loss. Still fuming about that one but that's trading for you.
For me and my clients, we build our stops and our profit targets around volatility and trading ranges. There is no static rule: each instrument has metrics - let the product tell you.
Time horizon is especially irrelevant to me. Whether it is on a 1 minute chart or an hourly or a daily, etc., the fundamental aspects of the situation are the same. For my stops, I typically enter a position and have a mental stop in place. My mental stop is not so much a dollar or % amount, but rather what the vehicle must do in order to deviate from what i think it should do. IE, if it falls to here then it is not following what it's supposed to do. If it is not doing what it is supposed to do, I exit the position as beneficially as i can. If the vehicle acts as it is supposed to act, it moves in my direction. Once it moves in my direction by a certain extent, an extent to where i can say "the trade should not return to my buy point," at that point i will put a mental stop at my entry. Hopefully that helps.
OP, Prerequisite to what Iâm posting is; Learn to think like smart money⦠Learn to read the market (price and volume)⦠Learn to create context⦠Learn to anticipate what will happen next⦠Learn trades either work.., or they donât Learn to act solely upon what you are seeing⦠Learn hard stops are not just for beginners⦠1.) Set target â target is surpassed with deliberation â target is my lock in profit stop â then I simply sit there twiddling my thumbs while the trade simmers some more â and target two is reached â or not⦠2.) Price may move a little, or a lot, no matter⦠If the trade is working, donât muck it up⦠========================================== You see, unlike humans, price movement is not bound by time, it occurs over it⦠And price will take just as long as it takes â to get where itâs going â every time⦠This holds for intraday, as well as swing trading RN