We're playing a grownup version of the marshmallow test (A) You take profits now, you get 1 unit profit vs (B) If you wait, you may get 3 units BUT there's also the possibility of getting zero HOWEVER with (A) if you take profits now, you might get 1 unit profit immediately, then you can re-enter the trade when it goes back to a Fib retracement, then on that second re-entry, you can sit and wait for another 3 units profit, so you have your cake and eat it too I think it's difficult to wait sometimes because the payoffs with waiting vs. taking are uncertain. If it's so clear cut as 1 marshmallow right now vs 2 in 5 minutes, then of course it's much easier. If you're the rare trader who always gets out around the right time / erring on the side of being too late to exit even, care to educate us on what you do while the profits roll in? or what your thought process is in terms of being able to hold on for the 3 unit profit while ignoring the possibility you might give all the gains back? eg. if 1 unit profit is like $1000, seeing $1000 of gains melt away is a real bummer but then if you constantly only take 1 unit profit out of a 3 unit profit potential trade, that's like leaving $2000 on the table every time as well
I believe you need to catch the fat end tail of a profit distribution, so I always trail and shoot for at least a 5 to 1. There for I´m willing to give up everything in between. I reverse the saying that a loss is not a loss when you hold it. I say a profit is not a profit unless you have sold it.
thanks, that's a interesting perspective when you're "willing to give up everything in between", do you set a specific price & not budge regardless of the price action in between? sometimes i waver after following the intermittent price action too closely, where even though i have a original target price, i move the price target after being too caught up in the whipsaws
For example if you trade ES long there is always big resistance (like high of the last week), minor resistance (XX25, XX50 points and so on), and micro resistance (every 5 points at the recent vola). If you see micro resistance beeing broken like butter aim higher. If it is sluggish consider taking profits right now or wait for retest of last micro support.
Except in trading, you don't just have two choices but many if you'd like to explore them. Instead of waiting to be able to possibly get 3 units, you can take 1 now to ensure to have some profit and then wait some more to take another one or two altogether until all positions are exited. That way if the market moves against you, at least you have taken some profit with 1 unit in hand. Or you can take 2 units now and then wait some more to take the last unit of profit so in this way, if the market moves against you, you have taken more profit in hand and just has to work on the smaller remainder of the position. Lots of ways to skin a cat.
The adult version of marshmallow test is called hyperbolic discounting "the tendency for people to prefer a smaller, immediate payoff over a larger, delayed payoff." Find it here under top 10 mental faults: https://listverse.com/2010/01/07/top-10-common-faults-in-human-thought/
If you can achieve 1:1 with a 60% win rate, that is pretty good system, and will make you a lot of money as long as you get enough trades and can size up. Then you just ignore the money you leave on the table. You are make a big money from trading large size. Who cares what you leave on the table. But maintaining a 60% win rate is not easy. It might be easier to aim for a win rate below 50% and aim for average winners that are larger than your average losers.
%% Good read. And that read gets better with just more time. Instead of taking a $20 marshmallow profit, or $100 , one year from today ?? Same paragraph ''how about $50 ??'' OK . Dont know about his assumption of interest rate of 9%\LOL I like chart study, reading........ WE did burn plenty of marshmallows, when younger\ took about 5minutes., or less I like US dollars also, but i want more than 1 unit of 3; some markets take away 1 unit[1k in pinebolt example] much more than giving1 unit. So i want to avoid that market. And some pine seasons, like SEPT, have so little rain, most plant by NOV-FEB,almost impossible to get any pine units planted in SEPT. Stocks/ETFs or inverse maybe more SEPT friendly .