Fluid Fox 

My biggest challenge as a trader is in trying to figure out if the current trade I'm in is likely to be a winner or loser (LOL). I have experienced many instances in which a trade I surely thought was going to be a loser became a winner, and vice versa. It particularly sucks when a trade comes within mere points of my profit target and reverses to stop me out- but my philosophy now is "tough shit." I had an idea, I executed the trade, and I really don't know if it's going to work or not.. It's out of my hands. It either works or it doesn't. Thankfully I'm not too concerned with the outcome of one particular trade. I have faith that if I always stick to my stops and targets, I will come out positive eventually. Not to mention, it's a consistent approach and I never regret closing a trade too early. I can't stand that. There's evidence of it in my first journal. This is not to say that I don't think that there's not valuable MGI that should be considered while in a trade, but this is more of a measure to compensate for my own poor judgement / psychology while in a trade. Right now I obviously have quite a black and white view of exits and it is subject to change as I grow, but nothing has taught me more to hold my winners than obeying my stop loss rule. I will stick to this rule until I realize that in all likelihood that what I'm doing won't pan out in the long run and that I need to be more flexible with my exits.. I will say, it's been very promising so far. It keeps me in trades. Just thought I'd share this one last time. I share because it made a huge difference for me, but I acknowledge that it may not be well suited to you and you have your own way. Because I have this rule, my weakness is "overstaying my welcome." I did have a winning trade on my hands today, I just chose to hold out longer.

I appreciate you sharing that @Fluid Fox, and I thought of you right after my stop got hit and I thought you deserve to slap me in the face for exiting early after all we discussed

I promise to come back with a much stronger intention tomorrow.

snax 

I appreciate you sharing that @Fluid Fox, and I thought of you right after my stop got hit and I thought you deserve to slap me in the face for exiting early after all we discussed I promise to come back with a much stronger intention tomorrow.

I'm glad. You don't deserve that much @snax.. This is a difficult issue to begin with and I can relate to it.

I think it's only a matter of time before you resolve it. Remember that intention tomorrow right before you place the trade!

Also, I tend to distract myself after entering in the FIO chat. I'm sure there's some accountability there if you want it.

bobc 

Well ... Even poor old Sun Trader was polite, but he has to be because I ve got the goods on him. More holygrail info to follow regards bobc

So that's what being polite gets you. I was wondering where my "goods" were at.

snax 

Got any advice for those of us who close winners too early, even when we know better?[/url]

I think this question could be rephrased simply as, "How do I know when to exit?"

And, I think, this is probably the single biggest hurdle any of us face, and it will always remain the hurdle at any given instance. More important than when to enter. It's the core of trading.

Take a hypothetical where you're in a trade and it is 3 ticks from hitting your target exit price. Let's say your stop is 16 tick backwards. In a sense, you're now risking those 16 ticks in order to pick up those last 3 ticks. Not cool.

But, to your point that you mentioned, if you constantly break your rules by exiting shy of your target, your method and your expectancy will begin to falter.

So which is the correct answer....stick to your rules or manage the trade with market generated information?

I cannot think of any single bigger dilemma than this.

I have four points on how I think about this, but I do not know the answer.

First, scaling out of positions tends to mitigate these problems but does not completely resolve the issue. Second, being able to identify exhaustion would help to mitigate but does not resolve the issue either. Third, knowing key levels at which you want to do business should tell you key zones where an exit would most likely be warranted, and this will also help but not completely resolve the issue because it depends on your ability to identify key levels or zones. Fourth, trade analytics trade analytics trade analytics. I beleive that when you combine the first three points with trade analytics, you can begin to get better at knowing when to exit and when to let positions run.

What I mean by trade analytics is: a) max adverse excursion, b) max favorable excursion, and c) some measurement of how far (if at all) price went in your favor AFTER you exited. The MAE and MFE only show how far negative and how far positive your position went while you were in the position. Most analytics programs that I've seen completely stop measuring after you get flat, and therefore have no way to determine whether and to what extent you exited too early. In other words, the programs really only tell you if you exited too late. This is a subtle but important distinction. I need an analytics tool that tells me if I exited too early. Which is to say, whether and to what extent price went in my favor after I got flat.

The trade analytics are a part of the journaling process that will help inform whether you're 1) scaling out of positions properly, 2) identifying exhaustion properly, and 3) identifying key levels properly..which is what you need to know in order to know if your exits need improvements.

If anyone has a trade analytics program (kind of like FT's S5 Trade Analyzer) that tells me whether and to what extent price went in my favor after I got flat, please tell me. I can usually just write it in my trade journal, manually. But hard numbers over a long period of time, which are not subject to my input bias, would be pretty cool.

Finally, I think that to have this type of tool, the user would have to define a max time length after going flat that the program will look to determine whether and to what extent price continued in the trade's favor. This would be a different time length for different people, depending on how long they typically hold positions open. But, to be honest, the tool could discern the average hold time based on the account's history and use that to determine how far after exit to watch and see. Hope that makes sense.

Great discussion here, btw. Thanks gentlemen!

PS. If I'm wrong or missing something, please let me know. Maybe I'm not really thinking clearly enough about this issue.

snax 

Got any advice for those of us who close winners too early, even when we know better? I am so fed up with getting in my own way Sent using the NexusFi mobile app

I developed an in indicator on a range bar chart that I use and it takes out emotions on my part . It does get me out early at times but also gets me out of a bad trade early . Is it perfect , of course not but it works decent for me .

SunTrader 

So that's what being polite gets you. I was wondering where my "goods" were at.

Hi Sun Trader
I heard you were in Belize
How did the boat run?
regards
bobc

And now the end is near....

It appears the biggest bone of contention is "" betting the farm""
Firstly , you will think very carefully before you do this.That will make a good trade.
Secondly, you want to trade in the white Ford Stationwagen
You dont have to bet the farm !!You can pick any amount
Its your choice
bobc

PS
I am waiting for permission to post an article , otherwise I will try and explain my big trade.

Japhro 

For me, 2 reasons : 1. There is a lot of waiting. much more waiting that trading right now. I live in Asia so I only trade from 8am EST to about 12-1pm EST, but out of that time period I might only be in trades for 20-30mins total. The rest is waiting 2. I trade the same 2-3 setups over and over. If I don't get my preferred setups, I don't trade. See above. Trading the same setups might seem boring, and it is, but that is offset largely by ringing in a winning trade. Mostly, I trade intraday reversals based on a few things that I watch, then price action and orderflow for the entry. There is nothing fancy or exotic, I try to establish market context (bullish, bearish, neutral conditions) and generally only trade neutral/range days. I have about an 82% win rate now and just do the same thing over and over.

Can't agree more, waiting and routine is the name of the game

My go-to indicator to look for alignment in the trend is the good old reliable MACD. However, I change the setting to 8/13/3. I use one-minute, three-minute and five-minute charts and simply watch. When they line up and are coordinated (all tending to point up, or tending to point down), I check the one minute for my entry. A 20 EMA or VWAP is also on my charts. I make sure market structure is in my favor as well and trend trade according to the structure. I use a couple of neurostreet indicators. These are great as well, but the MACD is a hangover from my previous approach but it works so well I've hung on to using it -- like a security blanket for my trades.

There really isn't that many different ways of approaching trading correctly, but there are an infinite number of ways to trade incorrectly. Unfortunately, higher visibility is a user level factor, and the acquisition of information and adoption of that information transfers almost instantaneously when it is readily available, versus when one has to seek it out and perception of adoption is non-existent.

Obviously, there are many more failed traders than successful traders, so there is a very high probability, that there is a commensurate amount of bad advice and faulty knowledge available to aspiring newbie traders. In other words, what-they-see-is what-they-get. The stuff that really works takes time and is hard work to uncover. That is, the methodological wrapper for inductively organizing the information gathered is accomplished through quasi-experimentation.

The other problem is, people believe what they want to believe, see what they want to see, and hear what they want to hear. They tend to avoid information that contradicts what they already think or believe, and tend to seek out other like-minded people. It’s the guiding force behind organized religion, the political system, cults, and yes...forums.

Researchers found that people are about twice as likely to select information that supports their own point of view (67 percent) as to consider an opposing idea (33 percent) and 3 times as reluctant to consider differing perspective when it pertains to politics and religion. One could only imagine what the percentage is when it comes to money and trading -probably 95-99%, huh? I've seen this phenomenon repeat itself ad infinitum on this forum. Big Mike and other experienced traders will dole out advice, and it is summarily ignored or even refuted, by aspiring traders with little experience.

It is not only easy to get sidetracked, spun around, and derailed by the markets, but one can also be misled if the information they are receiving is apocryphal. Everyone wants to make money, but with respect to what? Everyone one wants to wrestle the gorilla, until the door opens. So, instead of making rational decisions based on objective observation, they make emotional decisions that make them feel safe and comfortable. They develop a compulsive addiction to this stimulus-response loop which reduces them to instant-gratification junkies. They may have a seemingly effective methodology that generates profitable trades, but in the end, they never get ahead because they end giving it all back in the rake and grind. They either choose the markets-they-trade and the strategies-they-use randomly, or once again, make the decision based on comfort.

The result is that 80% of the ideas that are freely exchanged on this site are invalid. They are misguided, anachronistic, simplistic, irrelevant and often just plain wrong. The dilemma is, how does one separate the wheat from the chaff. Logic would dictate, and it is confirmed from my personal experience, that the best place to seek knowledge is from someone who is extremely knowledgeable and experienced. So for starters, i would question the quality of the sources of the advice you are seeking, and look to those individuals who are proven and have successfully accomplished what you seek to achieve.

Rational traders incorporate risk into the determination of their expectation, because their approach is reason-based, rather than driven by emotion. They are able to build positions, add to their positions, and follow the move-to-the-end. They focus on getting bigger, and size their trades to get the maximum compounded growth of their capital relative to the amount of risk they are willing to incur, and they trade the markets and use the strategies that allows them to accomplish these goals. They realize and accept that markets vary from day-to-day and even intra-day, and that it is unwise to trade the market the same way, on days that aren't alike.

Forums can be beneficial and I would certainly argue that more education is preferable to less, provided the education doesn't impede someone's ability to reason things through for themselves. And provided the knowledge that is imparted is accurate and doesn’t mislead it’s readers.. In order to effectively convey ideas to others, you must amend their perspective and their point of reference, so that they may see it anew, and from an entry point that they will understand. To spare them the inevitable beatings of otherwise learning it the hard way is not often appreciated until its too late.

I realize this is very theoretical sounding and not very practical in nature, but it is not without its reason. Learn to think critically (& on your own) and don't be a follower. The way you choose to learn and acquire expertise in trading is as important as the actual process. So, give it careful thought and approach it logically - develop a plan to learn and then execute the plan. Forget about popular opinion and don't take anything at face value. Organize and filter your ideas and determine what is relevant, but allow conflicting ideas to generate new conclusions. Keep in mind, that in theory, there is no difference between theory and practice, but in practice there is.