How can I stop myself from closing trades early?

I have this problem with my TP.

Stop losses, I can live with them just fine now. I used to have this problem which I think most people have had, where you set a stop loss and if the price gets close to it you move it above/below the next support/resistance/trendline hoping the trade will work out. But of course mostly it doesn't so you move it again.... or take a bigger loss, or find you can't sleep at night....

Somehow I have taught myself not do that. And reading around that seems to be one of the hardest problems to fix.

The problem I have is going the other way.

I currently have a strategy which is giving me a lot more wins than losses, for example I placed 8 trades this last week, 7 wins and 1 loss.

The previous week I placed 10 trades, 8 wins and 2 losses. Similar results the week before.....

Every trade looks exactly the same, based on S&R and trends combined with fibonacci retracements. I'm working out the trend direction on daily and weekly charts (sometime 4hr too) and entering trades on H1/30M chart.

When i get a setup I take it, in fact I am already placing market orders in advance when I see a possible setup occurring so almost all of my trades open automatically. Therefore entering the trade is never a should I/shouldn't I quandry for me - another problem I used to have that I fixed. Most of my trades are lasting about 2-4 hours, occasionally I have one open overnight and generally giving about 15-25 pips profit or loss.

But I just can't help myself closing winning trades early if they seem to run out momentum, or hit some resistance level and bounce back a bit several times.

At the end of each week, I go back through all my trades both the winners and losers and analyse each one to see how I can improve my performance.

One of the main things I am looking at right now is what would have happened if I just left the trade alone to run to it's conclusion.

This week I still have 7 wins, 1 loss and a lot more money.

The previous week i would have had 7 wins, 3 losses (so one more loss) but still have made more money.

I did a similar exercise for the last few weeks. Each weekend I prove to myself I should just leave the trades alone. You would think that enough to convince myself what I need to do!. So the next week I start with good intentions on the Monday but they all seem to go out the window at some point in the week.

Having tried to work out why that is, it seems to be because I also set myself a target that I want to make a 2% profit each week which on my account means 100 euros a day. This is because I want to compound this account over three years, not draw earnings from it, and running some spreadsheets tell me 8% per month would be great return if I can achieve it.

So if a trade is winning and hits some sort of resistance I seem to think 'well that is a quarter, half, three quarters, whatever of my daily quota' and I take it when I know damn well I should leave it alone..... but I just can't. I tried switching the computer off.. But it drives me nuts until I just have to go and look.

At the moment I'm trading 0.5% risk per trade with a fixed stop loss and only have one or two positions open at a time. At the very most I may have three concurrent positions, all on different currency pairs but that's an exception rather than a rule. I never have two position on the same pair.

I know this is a psychological problem and we are all different, therefore the answer to the problem is different for different people... but sometimes it is hard to fix your own psyche so I would appreciate any advice on how I can do it?

One thing did occur to me, that if I started to trade with 1% risk on the same strategy then I should get to my hypothetical daily quota of profit more easily just by placing the amount of trades I am currently doing and maybe I would be more likely to leave trades to their conclusion.

Is 1% risk per trade considered very bad practice? I always thought so, but I see many members here advocating and taking much higher risks.

If I had been trading 1% risk per trade over the last few weeks I would be hitting my 2% already even when closing trades early. At the moment at 0.5% I am not getting there (but I would be if I would just stop messing with my own TP and found time for another couple of trades each week!)

Thanks for reading my rambling thoughts on this matter. Any suggestions on the problem and my proposed solution or other solutions?

Rich

Sorry, but that sounds like an issue of greed to me. I would love to have your problem. I have a system which just auto edits trades when momentum starts to fall. I can't see any better way. I have looked at fixed amounts and percentages etc and can never decide. Sorry it's the most difficult but to me. Anyone can open a position but it's the exit that's the most important Simone once wrote to leavea but on the table for others. Also a bit of a ramble.

I was like you can not stop myself from closing trades early but I now do not
I beat it with move stop lose to entry and forget the position and traning myself more and more. You will not lose. Let it take profit or let it close at 0 profit. Try it

No, but either way the "rules" people give on money management are often quite stupid.

Why don't you risk a very large amount? I.e. 10%+ or something like that. It's because you want to avoid the likelyhood of a particular drawdown in a given number of trades.

For that reason the amount you risk must depend on your winrate and reward to risk ratio.
If you had 99% winrate with a 10R obviously you aren't going to risk the same amount as if you had 55% winrate with a 1R.

You should think about what kind of drawdown you are looking to avoid in a certain number of trades and how likely you are willing to accept this drawdown happening and run monte carlo simulations to work out what % risk would give you this chance.

That's coming at it from a mathematical perspective.

If you have problems with your psychology then you may find that risking more doesn't help, but for me as long as the analysis shows something I stick to it. There is no question of doing something else (moving SL, TP etc) because that is what the stats show and if I don't stick to them I've no idea what the chance of success is.

Sorry just another thought which i am currently implementing into my EA. When you are about to close your position close just a proportion, move to break even and reset next target. When that one is reached do it again and againa until you are completely out.

The problem is you are trading "historical" lines >support/resistance, Fibonacci<, so you are not trading the current trade. You are trading the last one all over again. So, expect to never know anything, since each new trade is a new event with new traders, new money, and new reasons for being in the market. Until you start trading the current live market, there is no answer to your question. When you say trades seem to run out of momentum, you have no idea because you are not measuring it. Just keep grabbing the pips that fit into the perimeter box of the art project you drew, based on the previous trade, and be satisfied you guessed correctly. Good Luck.

Hindsight is always 20 / 20

If you close trades "too early" and still finish with more money in your account, you are doing better than 95 % of all retail forex traders.

Careful. What you speak of is greed sir. With that said... When you are looking at the chart with no skin in the game you are calm, and see things clearly. You set what is an acceptable loss, and profit. All good. Then money actually gets involved, adrenaline pumping, the human ego cheering on our "GENIUS"! What you see at the beginning.. stick with. But if that fails you, ride it until you see two candles in the opposite direction of the trend. I do that, and tend to catch long swings. Oh.. and keep moving your stop up to new areas of support. or resistance. You have to be ready to eat some negative pipage though. Those consolidation periods are chilling. IMHO that is

Altough taking partial profits does not provide any statistical edge, from an emotional standpoint this might be a good solution for you.

use breakeven EA,take half of the profit out of the table and rest run with trailing.

The problems you face are general problems with every trader. You're not alone. Sometimes I close too early during retracement only to see that it continues again even without getting to SL before it continues. Continue to work on yourself. Keep trade journal and go through your journal again and again.
About the percentage risk per trade. If your account is small you have to risk more than those who have bigger account.

Hey thanks for the input guys

My account is a bit over 25K. I've decided to stick with 0.5% risk per trade for now, however I may try 1% later depending on results over a few months.

I have tried the stoploss to zero technique once I'm halfway to target, generally I seem to end up with 0 due to some spike (which would not have stopped me out at my original .5% risk) then the trade goes my way.

I've also tried for example, if i am currently 80 euro up, but aiming for 120 euro i will move my SL to +40. I can pretty much guarantee everytime I try that I end up with +40!

I've just done my analysis of last weeks trades. real profit 229.83 euro, would have been 301 euro if I didn't close some trades early but one trade would still be open so I can't be sure until I find out if that eventually hits the original TP or SL. I will look back at it next weekend during my analysis to see how it ends up.

OK I had a real good think about this. So what I am gonna do is post back on this thread if I close a trade early, like a blog. Then you lot can feel free to chastise me. Maybe a bit of public shame at not following my own strategy rules will provide the impetus I need!

I also have been checking what would have happened if I make one simple change to the strategy and it would have increased profits considerably over the last few weeks since I started using this strategy. I want to implement that change to see if it works forwards as well as back testing. However I need to break this bad habit first. That's another good reason for me.


Rich.

Hi Rich,

The issues you discuss are commom to just about every trader. The fact you have already managed to discipline yourself to respect the stop loss suggests you should be able to tackle the TP also.

The difference, though, is that the stop loss is concrete and defined, with always the hope that a trade underwater but not yet at the stop, may yet still recover. So it's easy to sit there and let the trade work itself out. With a TP, we are in profit and fearing it may evaporate at any time, so we get a huge temptation always to want to ring the register.

The answer is deceptively simple: accept that many times small profits will evaporate but know (from testing & review as you have done) that it is better overall to let trades run all the same. Easy to say, psychologically/emotionally hard to do. It's one of those occasions where you have to force your head to rule your heart.

I have dealt with this problem by having a defined initial target for all trades. As a trade progresses in my favour I'll move the stop up to breakeven to eliminate the risk but I won't ever take a profit smaller than my minimum initial target. I may let a trade run on for more if it gets to the target and still looks strong. So my trade result profile is either full losses at the stop, scratch trades from small profits reversing, initial target profits, or bigger windfall winners. But never small booked profits.

This way you will be able to let trades run and have winners on average bigger than losers, all whilst still having risk well controlled at all times. It's just a learned discipline, and you've already proved you can do that on the stop loss.

Hope that may help, best of luck in your trading!

Thanks Oldtraderman, that is an exact description of the process that is going on in my head during the trade! I do already start each trade with a predeifined SL and TP based on fibonacci levels which is what my strategy is using.

By the way I am not doing anything clever in fact I'm not using any indicators at all. I just use trend, cycles, structure and S&R to get a feel for the overall direction and the current direction on W1, D1 and H4 - then use Fibonacci retracement to set the entry point, SL and TP - usually on M30 but sometimes on H1, My Lot size varies depending volatility but the risk is always 0.5%

I use Stop/Limit orders to place the trades.

I think my decision to openly discuss my TP problem in this forum is in fact part of the solution to it. I'm actually getting into the mindset now that if I don't let the trades run then I'm letting you guys down too! If that makes any sense.

Rich

Before thinking you have a problem, do yourself a favour. Run 2 accounts side by side with one allowing it to run more and the other doing what you do now. The results might surprise you.

Problably one of the best possible replies to be given.

I can easily set up a demo account to do that but I'm not sure how that would be any different than analyzing the previous weeks trades to check if they would have reached my original TP (which was set when I opened the trade so I can see where it was) had I not closed them early.

Obviously when I do leave all the trades alone, !!starting tomorrow!! there is no way I could determine what would have been the result if I had closed any early. Sure I could make a note of the price at which I *would* have closed early but that isn't ever gonna be accurate as already I sometimes think 'close it now' but then I resist temptation, so noting the price doesn't always mean I would have pulled the trigger.

Hell, I'm not even sure that running two accounts alongside each other wouldn't skew my mental process!

I just checked my journal since I started this new strategy. It's one of my own design by the way just based on stuff I have learned in the past.

So I have

Total Trades: 25
Losers: 4
Winners that hit original TP: 4
Winners that hit TP but I had moved TP to a position of small win and left the trade running: 1 (similar to move TP to 0)
Winners that I closed early but would have hit original TP: 15
Winners that I closed early but would have hit SL: 1

3 weeks actual gain 2.3%
3 week gain if I had let all trades run 4.3%

On the face of it, that clearly shows that I need to resist this temptation, but I've been round long enough to know that

1. This isn't enough trades to prove anything for certain yet, and
2. Even if it was enough trades to prove this for certain, the same 'certainty' may not necessarily be true next month.

Not easy this trading business..... is it


Rich.

Too early? You can not know that. Hindsight bias.

I don't trade like others here, I have a very tight trade management process that means I often cut trades only to see them go on. I have however come to realise, when I try hold trades for longer, my monthly result is worse. The point is you can never know the potential for any move with anything more than assumption. What you do however know is the now, and profit in the bank is better than none. Holding trades takes you through more risk events and the reasons for the move diminish over time with the market moving onto the next thing in a blink of an eye. Just do yourself a favour and test it out before trying to change something that could be the best part of your trading.

If 2 accounts are a problem then run 2 months on the same account. You will find out which one is better and why by doing so but you need to have a detailed record to get down to any issue that may be causing unnecessary problems.

Hi TooSlow.

What part of what I am doing here is being affected by hindsight bias?

Rich.