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Most of your profits come from ... (base hits vs homeruns)


Discussion in Psychology and Money Management

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  #31 (permalink)
joeyk
Australia
 
Posts: 24 since Jul 2013
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Why you need small profits?
Its for emotional capital. If you keep trading to go for home runs your emotional capital will run low. Getting big wins is hard and if you keep getting chopped up you will probably miss the trade you should of taken to get the home run because your emotional capital was low and you were sick of losing.

I consistently take 3 ticks in the bonds market and keeps me in the game. They stack up every day and keep my business open the next day.

Home runs?

A home run for me is like 6 + ticks. They happen when traders are puking and exiting losing positions and a lot of new money is coming in too.

They keep me in the game in a major way. If you trade 10 of these a month they def stack up right? What about if you get 15 of these a month? 6 tick Rallies are common in my market so they happen often. But you need the emotional capital to trade them. How do you keep your emotional captial in check? By taking small profits when you can.

Finding the balance between home runs and small profits will come with experience.

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  #32 (permalink)
 Itchymoku 
Philadelphia
 
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joeyk View Post
Why you need small profits?
Its for emotional capital. If you keep trading to go for home runs your emotional capital will run low. Getting big wins is hard and if you keep getting chopped up you will probably miss the trade you should of taken to get the home run because your emotional capital was low and you were sick of losing.

I consistently take 3 ticks in the bonds market and keeps me in the game. They stack up every day and keep my business open the next day.

Home runs?

A home run for me is like 6 + ticks. They happen when traders are puking and exiting losing positions and a lot of new money is coming in too.

They keep me in the game in a major way. If you trade 10 of these a month they def stack up right? What about if you get 15 of these a month? 6 tick Rallies are common in my market so they happen often. But you need the emotional capital to trade them. How do you keep your emotional captial in check? By taking small profits when you can.

Finding the balance between home runs and small profits will come with experience.

Just curious, How do you manage where you exit? Do you find it advantageous to trail your stop order and leave no limit order to allow opportunity for price to run? I still work on this aspect as a trader and wonder how others prefer go about it. Thanks

R.I.P. Joseph Bach (Itchymoku), 1987-2018.
Please visit this thread for more information.
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  #33 (permalink)
 
Massive l's Avatar
 Massive l 
OR/USA
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I use a scale out method where my first target would be considered a base hit.
Then I hold onto it to see if I can maximize my gains (homerun). A homerun for me
ranges anywhere from 2-6R my initial target.

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  #34 (permalink)
 Itchymoku 
Philadelphia
 
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Massive l View Post
I use a scale out method where my first target would be considered a base hit.
Then I hold onto it to see if I can maximize my gains (homerun). A homerun for me
ranges anywhere from 2-6R my initial target.

Could you elaborate more on how you manage the home run? For instance, what are you looking for to get out of the home runner? Do you hold onto price to the next level you've identified in advance despite exhaustion or do you use some discretion to keep what you've made? Or, do you use some sort of time exit like exiting at the end of the day regardless of all of the above?

R.I.P. Joseph Bach (Itchymoku), 1987-2018.
Please visit this thread for more information.
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  #35 (permalink)
joeyk
Australia
 
Posts: 24 since Jul 2013
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Itchymoku View Post
Just curious, How do you manage where you exit? Do you find it advantageous to trail your stop order and leave no limit order to allow opportunity for price to run? I still work on this aspect as a trader and wonder how others prefer go about it. Thanks

Exiting is a skill you become good by doing it. I had a lot of trouble for many months but getting consistent with taking profits. Im just letting you know this first because i know the feeling of not knowing when to exit when your not consistent yet.

How i exit
How i exit is the same as how i enter. Im looking for size and traders coming in behind me pushing the market my direction.

If i enter a buy trader and i have traders coming in like 200, 100, 50, 50, ,200, 50, 20, 40, 100 contracts on the buy and all the sudden i see 2000 buy orders not move the market up i cover and take what i can. 2000 contracts should move the market based on the last hour of activty. This is just one simple scenario.

There is really no hard and fast rule to profit taking, its more art then science when your a discretionary trader.

Only hard rule is to follow the size and understand its not how size reacts to price but how price reacts to size.

One of the Prop Traders that gave me this advice i thought well f*$@) this is gona be hard. He was right. Its seriously and art. A Skill. You get better by doing it. Most my profits are 3 ticks and i get a 6 tick probably 50% of the days during this current market.

Losing trades

My losing trades are -1 to -2 ticks sometimes 3 ticks. 3 tick losers dont happen often. But again im looking for size.

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  #36 (permalink)
 
Massive l's Avatar
 Massive l 
OR/USA
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Itchymoku View Post
Could you elaborate more on how you manage the home run? For instance, what are you looking for to get out of the home runner? Do you hold onto price to the next level you've identified in advance despite exhaustion or do you use some discretion to keep what you've made? Or, do you use some sort of time exit like exiting at the end of the day regardless of all of the above?

I have a predetermined level. I don't day trade that often. I'm usually holding positions for a few days up to a month.

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  #37 (permalink)
TheDude
london
 
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rubyslippage View Post
I'm an intraday scalper so I go for lots of base hits. But if a strong trending moves transpires, I often get a home run or two because I don't use fixed profit targets in a strong trend or if a measured move target is far away from an entry price.


Ditto. But I also position trade and find the distributions are about the same.

FWIW:

My thoughts are that if you model the market as random, you should be using fixed stops and profit targets.

If you trade based on the assumption the market is non random, you shouldnt employ targets, but let the fat tails/home runs come in.

I'm thinking along the lines of probability distributions of STD's

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Last Updated on July 27, 2013


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