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Cut losses short and let runners run!

 

Cut losses short and let runners run!

I do the total opposite of this rule/suggestion/advice: "Cut losses short and let runners run"! I am not a good loser, yet. I hold on to losses for too long, hoping that it'll get back to break even or exit at a profit. On the other hand, I am swift to take small profits. 

How did you overcome this behavior?

 

Tue, 06/21/2016 - 11:30am
 
JT

Have you tried trailing the market when you're in profit instead of closing the order?

 
findthetrend

I am doing the same thing. The only way I've been making a profit it to be very accurate in my set ups. But my next goal is to cut my losses. Jeff Crystal mentioned something during CATT once, and I don't remember which one, but he said to use a demo account you don't care about and just focus on manually cutting your loss when it turns against you. I guess you can decide if you want a -1 or -5 or -10 pip to be where you close, but do this over and over. But don't touch your winners. Just leave them on indefinitely and see what happens.

So, this is actually my next goal for practicing. I tried this a little and it's interesting to see just how far the winners ran, but I was also surprised that there were very few, most of the winners became losers and had to be closed. I think it's a good plan and I plan to use it myself.

 
FXGold54

emercado;

Might I suggest using a set TP and Sl and once the trade is in, forget about it or realistically, don't change it.

 
Sokha

What I have done in the past:

1. 2 targets: a). 1:1 reward: risk and b). HTF opposing level. Do not touch the stop loss and take profit--10-30 trades
2. 2 targets: a). 2:1 reward: risk b). HTF opposing level. Move stop loss to break-even--10-30 trades
3. 1 target: 3:1 reward: risk. Never move stop loss or take profit--10-30 trades
4. 3 targets: a). 1:1 b). ITF opposing level c). HTF opposing level--10-30 trades
5. 3 targets: a). 3:1 b). ITF opposing level c). HTF opposing level--10-30 trades

I have come to a conclusion for target 1 is 2:1 and target 2 is at HTF opposing level (usually ~6:1) for a short-term swing trade and move stop loss to break-even + commission after target 1 is achieved.

Hope this help,
Sokha

 
AsleB

Trade with smaller position sizes for a while. And have your rules written down.

 
hakchinoy

I answered a similar question earlier today in the "Daily Risk" thread (https://apiaryfund.com/forum/daily-risk?page=0#new). That solution also should work for you.

 
patrex1225

anybody in middle of trading and alveo going thru up dates

 
bowl851

yep me too

 
Edwin

You people rock! Thank you for all your recommendations. I'm definitely will be studying them and applying them in my trading!

Happy trading

 
michaelj

You may consider trying this rule when you are first starting out. You can change it if you want to, after you become consistently profitable.

Never adjust your stop until your position is profitable by more than your risk amount. (the distance from your entry to your stop)

This rule can have some exceptions, for example you may have a rule in your plan that says you exit positions before a significant news event or before the end of trading on Friday.

If you do this, then your average gain should exceed your average loss. (Reward/Risk > 1) If you are still not consistently profitable then you can work on doing a better job of identifying high probability patterns to trade. (# gains > # losses)

Following this rule has some important implications. You WILL NOT move your stop to break even. The market does not care where your break even point is. You WILL watch as profitable positions sometimes turn into losses. This will be extremely difficult, frustrating, and demoralizing. Get over it. It is OK to take a small loss. That's part of trading. It is NOT OK to miss out on a big profit because you moved your stop too soon.

Taking big losses will wipe your account out quickly. Taking small profits will painfully grind your account into dust. Don't do it.

 
wdennisb1

There is no easy answer to this dilemma. Market times, Market volatility, the specific characteristics of the pairs you trade all will have an influence on the effectiveness of your stoploss/ profit take strategy, not to mention your own personal psychology.

I can't be up 25 pips and watch the price come all back to break even, my psychology is not comfortable with that at all. I find the 1 X Risk to be the most reliable so I exit half my position and move my stoploss to break even. I plan on exiting the other half of my position at 2 X Risk or the next supply/ demand area, but in consolidating markets the probabilities of making it to 2x or 3x Risk is reduced.

It may be a little bit of work but what I do at the end of the trade day is review all of my trades and document what the maximum profit available was, prior to the price coming back and hitting my stoploss. After documenting 2 to 3 days/ weeks worth of trades, a pattern will emerge. You will need to do this for each currency pair you trade, documenting the time and market conditions will give you greater clarity into what the probability of reaching certain profit targets are.

 
Eva

This is something I'm still working on as well. One thing that's been helpful for me is to look at support and resistance levels OR Fibonacci levels for retracements (expect them!). Know where the best entry and exits are BEFORE you place your trade. I like to use stop orders more than market orders. I find that it helps me be more patient for the right conditions. ALSO! Nate consistently uses time and price cycles. I've found this incredibly helpful. He will sometimes draw boxes where he expects his time and/or price to hit then he waits for one of those to happen. I, personally, like to keep time and price cycle in mind and know that if the pattern continues in a similar patter as the recent past, the price action should behave in a certain way. If Price action deviates from what it has normally done in the past, I tend to get out.

In other words, I try to know what to expect as best as possible before deciding what I'm going to do. Constantly reassess your position. I like to flip up and down on time frames to make sure it all looks as good as it did when I entered the position. Shawn does something similar to this by having a 5 min chart right next to his 1 min chart. If the reason you got into that trade no longer exists, get out!

Read this: http://www.quantifiedstrategies.com/20-habits-of-wealthy-traders/
It's one of the best and simplest articles I've read in a while. Many of these habits run through my mind as I'm trading.

I like #2: "making money is more important than being right". If you're wrong, accept it, and move on.

 
pakydak

good info here.

Thanks,

 
KennethC

The way I overcame this problem was by talking portions off at certain level and letting the rest run. Yes some times the price just takes off and you wish you didnt take half off at 10-20 pips.. but in the end it averages out because lots of times it will never reach the profit and just comes back to tag you at break even a loss.

Demo trade for a month week or even a day... and do EVERYTHING youre supposed to do. Write down the rules.. put it near monitor and DO IT. JUST DO IT.

The purpose of this demo excercise is to FOLLOW THE RULES 100% . ITS NOT TO MAKE MONEY. JUST FOLLOW THE RULES. If you cant make money on demo..you will NOT makevmoney on live account.

Ive slapped my face so many times because I dont follow my own rules many times.

Just do it! Man up!

 
KennethC

Use an automated breakeven and take partial profit script. It helps. A lot

 
coracle15

where do find the take partial profit script Kenneth?

 
KennethC

I use it on MT4. I don't know if they have it on Alveo.. ; )

 
donruadh@gmail.com

I don't believe that partials is available on Alveo. I think, you have to trigger two trades at the setup and close one once risk is covered or the first profit target is reached, whichever is the goal.