"Never turn a winner into a looser" - Myth or Reality?

Hello every1,
There is one this that's been bothering me for quite some time. THE GURUS say: NEVER TURN A WINNER INTO A LOSER... Pretty obvious, right? No. Not for me at least.

What if: for example, I go long cable at 1,5, SL 50, TS 50, and it goes in my favour for say 20 pips to 1,502( so its a WINNER already, right?) then it retraces say 40 pips to 1,498. So now what: its a LOOSER for this very moment!! I DID TURN IT A WINNER INTO A LOOSER!!!!!!!!!!!!! But I am acting according to my plan ( SL 50,TS 50).
If it goes back up - thats fine, but if it retraces further - I am stopped out, and there we have - a classic WINNER TURNED INTO A LOOSER!!
So, what to do in a situation like that? Or perhaps I am understanding the whole idea incorrectly?

Please, Someone Wise And Skilled , clarify this matter for me, please, please, please

I never understood that statement as it is completely BS in my opinion. You never know what the next price will be, if it goes up 20 pips or 200 and if it goes down 20 or 200 before it goes up. So you can be right but being stopped out due to a tight stop simply because of market noise.

For me it's only important to have a directional bias (daily/weekly) and go with that direction. Therefor I don't use stops at all.

If you're using a trailing stop, then that is your chosen method of risk management when a trade goes into profit. Management of your exposure to risk is a sensible policy but placing a stop at b/e when a trade goes a few pips in your favour is too prohibitive for me. The margins are tight enough as it is to not win even when you're right.

I think the phrase really refers to being objective in your decision making when a trade is in play. If a long trade is in the green a couple of hundred pips, looking a bit overbought, and then breaks down, are you just going to sit and watch whilst the market trends back down to your entry, hoping that the up-trend is still intact? What price action is significant enough for you to believe that the reasons you entered the trade no longer exist? If you use a 50 pip trailing stop, then it must mean that a retracement of 50 pips or greater is significant for you. Personally, I think the break of a low/high/S/R would be more appropriate, but that requires a greater degree of management than a TS.

I once read an article, (third hand anecdotal so take a with a shovelful of salt) that traders are generally quite adept at picking direction, as much as 70% of the time they get it right. But do they win on 70% of their trades? I don't think so. So there must be an issue with the way that people manage their trades.

I scale in and out of trades, multiple entries with the focus on their average, when the point comes to taking profit, once that happens that profit is either banked or used as a cushion against the remaining average position, the worst case scenario then is price reverses and I end up with a small profit or wash.

I do not look at individual trade entries only my book’s overall profitability on the current leg, so yes once a trade goes to a certain point ( that level is not static, current price action dictates) I will not let price fall back past my average position and/or past the profit that has been booked on that current leg.

fwiw,

regards

They are several scenarious of turning a winner into a loser , one is when you wait too long , and hope the trend go higher or lower . Here the trigger "greed" is turned on. And your way, it is also turning a winner into a loser. I had this problem over a year , and now I trade more carefully . When my positions goes in my way , lets say 30 pips above entry , then I automatically move my stop at my entry level , so if it goes against me , at least I will end intact. If the position goes my way , according to my plan , and the stop was hit before at zero level , I would entry again . This is one simple type of MM how not to turn a winner into a loser. I coult recomment some books to read if you want about MM , they are a great deal. Cheers !

I have tested this quite a much in the past, conclusion: There is no point in using any kind of sl to breakeven or similar - just stick to your exit rules and it doesn't matter if trade is temporarily in the red - all that means is the end result and if the statistics are on your side then they are.

You might want to consider expanding the concept of win/loss here. It is a loss if your believe the original target of 50 pips is no longer possible, and that the market is moving against your original analysis. If you think you can still get the 50, then being down 20 is just part of the road to +50. Perhaps there has been an announcement that changes the market perception. In that case, and -20 pips is the best you can do, then its time to exit the trade and go the other way (rather than letting it move all the way back to -50).

You will find that experience will make this decision process a bit easier. For example, if I find myself down 20 after being up 20, and nothing has changed re: announcements, etc, then the next time I am up 20, I will not allow it to move negative again (and have probably added to the original position on the pull back). auxesis's point about getting a better average price is important.

dont believe the gurus

There are so many things to consider when managing a trade. I am also one of those people who does not like to see an initial winner turn into a loser. Here are somethings tha have helped me.

1. Consider WHERE you are entering the market. If it is in the middle of a momentum move then perhaps 50 pips stop is too close...depending on which time frame you trade of course. Try looking at where the swing point is and placing your stop there.
2. Remember that markets NEVER move in a straight line...even on tick charts there are retracements and corrections. So perhaps you can watch these point and determine if the market really has turned against you or is just retracing on a larger underlying trend.
3. Consider dividing your position into halfs or thirds and take a small portion off when you are in a reasonable amout of profit (only you can decide what is "reasonable"). Then move you stop up to protect that small profit...if the market goes against you you still have a small profit..if not you get the full ride and them some if you feel like it.
4. You will find that #3 is quite liberating and you may feel like letting your profit ride for just a little bit longer perhaps gain 50 + another 20...who cares your trade is now risk free...no matter what happens you have a least a small winner (which beats a loss or even BE)

I don't know if this help you at all but I've found that this has liberated my thinking and attitude toward the market. Usually now my 2nd half position goes for hundreds of pips instead of the initial 75-90.

When you get to this point you will also begin to realize that no matter what time frame you trade there is always a BIGGER one with a bigger trend that can carry your trade further and farther than you ever thought possible.

It is more or less BS.
Never letting a winner turn into a loser, would mean setting it to break even with a 1 pip profit.

Personally breakeven is my fisrt move once the position moves in my favor. Loosing trades cannot be avoided but if you pay close attention to your loosers and study them you'll find better places to set stops and breakeven points. If one of my trades gives me profit and turns around and stops me at a loss... so be it, I look for the next ride its that simple. But when we first start we end up looking for other systems or think we are doing something wrong by taking a loss. You have to learn to embrace your loss with key money management rules.

I couldn't agree with you more, Mack.
The first thing in trading I look for is to break-even. I trade with the trend and always on the lookout to retracements for re-entry. Most (if not all) of my losses came from me overtrading the market or counter-trading the trend. I'm most successful trading with the trend and exiting on the pullbacks. I'm also successful with trading by not watching the market 24/7. I tend to take a day or two off per week now and because I do this Im able to see the market with fresh eyes and a clear mind, helping me make better trading decisions.

For me, as a mid skalper, is a reality.

Lubo.

Totally agree.

Thanks for commenting on this "truism".

Ever since I started to re-examine this "truism" things started to get better.
Why? (IMO) Because you start working with the reality of the market at the time and not with superimposed limits that you decide to "allow" it.

If the premise that your trading is based upon is sound over a large sample-size of trades then, it should work out while allowing for the market to be its(crazy)self.

Also: Thanks for this. It speaks volumes around this place:

Thanks guys for your enlighted cooperation. You did shed some light on this absurd form me. I'll be treating this rule with caution and without sense of guilt every time I DO THIS

Initially I accept the risk of a certain loss when I take a trade, and I accept that until the trade closes in profit, or goes far enough in my direction where I can now set SL at break even, or lock in some profits. Always its better for the profit target to be reached then to get stopped out for less, but thats part of the business here is to keep your exposure and risk in control. The idea of never letting a winner turn to a loser is valid when you refuse to close a trade that doesn't go according to plan and you don't accept that you were wrong, and end up losng a large amount of your account.

Excellent. Most of the time, I use mental stops. I also monitor all of my trades, trading on the 5m and 1m. 2-5 setups a day.

If you use stops, you have to be able to adjust them according to the market or just take the pips the market gives you.

Myth. You will eventually lose your account this way. Of course, there are a lot of other ways to lose your account as well. This is just another in a long line of cliche strategies. The only thing I can say positive about it is that it may well help you to lose money at a slower rate than a lot of other strategies out there.

Regards,

Yes, it's really interesting how many "strategies" seem to be designed to do no more than prolong the inevitable for those traders whose approaches are full of holes. Probably just industry-promoted stuff to make the bloodletting more humane.

"Never turn a winner into a looser" is a very important "concept" for trading/investing. Losing a trade is more than losing money, you also lose the ability to continue to trade. It can be a useful trading rule if you are a swing trend trader but it might be useless rule for a scalper on a 5min chart. Gurus are liars/advertisers. Even if the gurus are competent, but they are not your personal mentors. The competent gurus says very generic stuff. You have to ask yourself "how does that rule apply to me?".