What's Worse: Missing the Move Entirely or Giving All Your Profit Back?

Discussion in 'Risk Management' started by schizo, Apr 21, 2010.

  1. schizo


    From newbies to pros, we've all been there. Whether you missed a pop or you rode the pop only to give it all back, the outcome is the same. This is perhaps the oldest conundrum that have plagued traders world over for eons.

    Fear and greed? Hardly. Stupidity is more like it.
  2. LeeD


    Including commission a trader probabbly ends up with a tiny profit or a tiny loss. Here is the answer.

    The other way to look at it is by staying out of the market the trader learns patience while by entering a position a trader gains confidence in the entry method and learns managing an open position.

    I may be missing the point of the question but... assuming the trade hasn't ended in a loss after commission:
    1) the advantages of entering a trade are monetary - there was a chance that the trade would and up in a substantial gain;
    2) the advanatages of staying out are less tangible - not using capital that could be used in another trade, not having to watch the trade...
  3. this is a hard lesson to learn, everytime it gets to where I am thinking"should I sell"...I should. but sometimes I dont becuase I "dont want to miss out" if it runs. Then I kick myself. Still working on this psychological aspect of my trading.
  4. Lethn


    I'm getting round that psychological barrier myself too, this is why you use limits thought I think, just set the limit and decide there and then how far you will wait for it to go down and just accept it. It's amazing how much psychological training you have to go through when it comes to trading, yes you can lose out on extra profit, but it is better than taking a huge loss for instance.
  5. LeeD


    Unreservedly agree
  6. i think i am going forward with this strategy...."sell when the little monster inside me wants to wait for more profits"
  7. LeeD


    Softgiant, it is a good strategy unless you rely on very infrequent "home runs" or you scale out of a position systematically.

    What often happens is the price hits a minor support/resistance and the risk/reward for holding a position versus closing it changes dramatically.
  8. schizo


    One way I overcame this problem is by scaling out of the position. I would often sell or cover half and lower the stop for the other half to b/e. This way I can at least pocket half while letting the remainder to ride out the move.

    What's hard is that when the damn price moves like 10-ticks in your favor and then stalls, should you sell or move your stop to breakeven? Or leave your initial stop alone? You know from your previous experience that it often retraces back down to your entry, usually just above the S/R, and then shoot right back up. So should you let the trade work itself out?

    Of course, I know what I would do but, if you give some serious thought to this dilemma, it might not be so easy as it seems.
  9. Missing a move is a missed opportunity. The market presents new opportunities every day.

    Having a profit and giving it back is part of your trade management plan. As a trader you acept the risk when you put the trade on. If your plan calls for you to let the trade work and you end up losing money then it's a good trade because you followed your plan and over the long run it will all work out.

    If you let a profit turn into a loss because you let your emotions override your plan thats a different story.

    Gotta keep the emotions under control and follow the plan man.

    Shizo; which did you do, miss the move or give it back?:)
  10. Scale out baby.

    As Buzzy always said ring that register.
    #10     Apr 21, 2010