I've been trading for two years and have managed not to lose it all and have made small gains. My biggest problem is cutting winners. I did it again on Friday with Avnet. I even have a big sign on my screen, "Stop! Just move the stop!" I know this is amateur, but, has anyone found a good approach or mind set to stay in winners? (Amateur is just were I'm at right now) Thanks in Advance! /truber
What instrument? If you're trading options, trade on a spread, that way, you have a clear limit to your winnings and a much better risk / reward indication when greed intervenes.
No much you can do about that but learn to trust the stops and limits you set *before* you got those greedy stars in your eyes. You can be right on absolutely everything on your entry and targets, and still end up with an amazing tax deduction.
Never exit a trade manually, always utilize a stop with a price-range of accepted cost of transaction (paying the spread / volatility / even lack of liquidity) You can do the same for purchases, thus buying on strength Never set a stoploss where it is likely bullish price action can stop you out, this is farther out than you can imagine but my personal limit is at 50% regardless (though PA doesn't follow this always) Never get in or manage a trade unless you have strict rules to follow It's OK to exit prematurely if you've broken your rules or act rashly. Instead, congratulate yourself for breaking a pattern. But if you feel confused, leave a stop where it should be and walk away (being in Nature may help even). You might be pleasantly surprised when you return, or you might gain confirmation how stoplosses are working for you. If you can't walk away, either you're trading too large, or you need to check your psychology, ability to follow your trading rules and proper execution Be happy!
All loss aversion. You need to be comfortable with loss which means you also have to be comfortable with money and not have a complex around it.
What helps me to let profits run is to layer in & out of positions. I will make 4 entries into each trade - only adding on when all positions are profitable and will let the last 1or 2 positions profits run having taken profits on half to three-quarters of the trade. This ensure my losing trades will be smaller than my winners and allows you to take profits at various levels while still letting your winners run, just don't let the winners turn into losers.
You might also find it useful to focus on the losing side. Once you beat that gambler's fallacy to death, it's a pretty easy transition to being a good winner too...and neither is like your high school coach taught you where you stay in the game and be a good sport. Good winners and good losers in the market take their ball and go home.
You assume that cutting winners is a problem. It is not. Take winners when you can. I manage my winners early. The herd will tell you otherwise.