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How to cut losses and letting winners run

  • #41
  • Feb 7, 2010 10:58am Feb 7, 2010 10:58am
http://www.brettsteenbarger.com/articles.htm

I found Brett Steenbarger very helpful.
  • #42
  • Feb 7, 2010 12:13pm Feb 7, 2010 12:13pm
Quoting cammomile
http://www.brettsteenbarger.com/articles.htm

I found Brett Steenbarger very helpful.
Care to elaborate?
  • #43
  • Feb 7, 2010 1:08pm Feb 7, 2010 1:08pm
Quoting tjfxtrader
Care to elaborate?
He is a PhD specialising in trading psychology. There is an article called Letting Profits Run, which covers the topic of this discussion.
  • #44
  • Feb 7, 2010 5:40pm Feb 7, 2010 5:40pm
Quoting faure
We all hate losses and naturally avoid them; likewise everybody loves a winner. The problem is that this kind of thinking leads to holding onto losers and cutting winners - maybe that's why it's so hard to follow the old trading axiom, "cut your losses and let your winners run". This isn't the only, or even the best way to trade but there is logic behind it. It seems simple enough and makes sense.

[font=Veranda]The answer could be to change the way you think about losses; more specifically, love your losses....
Interesting topic! My humble view is that the "cut your losses and let your winners run" saying is a good principle with your trading method but somewhat of a useless cliche when it comes to the execution level of your trading.

If a trader fully understands the CAPABILITY of their system/method then they don't need to worry about letting winners run and cutting loosers short because they already know where the stop and profit target should be for every trade.. "Letting it run" with things like a trailing stop I think is a load of bollocks - you do things like this when you don't fully understand the capability of your trade.

I fully agree with you about "loving your losses" - once again, if you understand the capability of your system, then you know what to expect with losses, and you should not be surprised by the outcomes. I still dislike losses, but when I have a loss within the range of normal expectancy then I know I have done my job properly..

A very simplicistic response, but it works for me..
  • #45
  • Feb 9, 2010 3:57am Feb 9, 2010 3:57am
it true u have to love your losses but theres no need to accept them when u noe u can try for break even. Every1 can rem the december09 - jan 10 period where eur/usd plunged about 1000pips from about 1.45(i was down about 700pips). thanks to the recovery system by nanningbob, i didnt take the loss and instead applied his recovery system. just kept buying at multiple levels and finally the 200+ pip retracement at 1.35ish came n i was out with a tiny profit. so cut losses hmm unless its really extremely against u like more than 1kpips let ur winners run yes. but most importantly MONEY MANAGEMENT. with proper money management u can have -ve pips like the dec trade i was down about 500pips but im stil out with +ve $$

today was another good example for the eur/jpy i was shorting all the way and the pair was jus going up and up. finally made it out +$90 bucks about 5mins ago
  • #46
  • Feb 9, 2010 7:08am Feb 9, 2010 7:08am
Quoting yunielescaz
it true u have to love your losses but theres no need to accept them when u noe u can try for break even. Every1 can rem the december09 - jan 10 period where eur/usd plunged about 1000pips from about 1.45(i was down about 700pips). thanks to the recovery system by nanningbob, i didnt take the loss and instead applied his recovery system. just kept buying at multiple levels and finally the 200+ pip retracement at 1.35ish came n i was out with a tiny profit. so cut losses hmm unless its really extremely against u like more than 1kpips let ur winners...
reading this post makes parts of my body quiver that aren't meant for quivering :/
Congratulations ScalaFX for coming out of the closet!
  • #47
  • Feb 9, 2010 7:19am Feb 9, 2010 7:19am
Quoting tjfxtrader
Looks like you found a winner.
talk about reviving an old thread!

lol!
  • #48
  • Feb 9, 2010 7:33am Feb 9, 2010 7:33am
Quoting marcus1rex
talk about reviving an old thread!

lol!
nuh uh! they are just posting on a higher-timeframe. only noobies post on fast timeframes >)
Congratulations ScalaFX for coming out of the closet!
  • #49
  • Feb 9, 2010 11:39am Feb 9, 2010 11:39am
the key is not necessarily always letting your winners ride, because depending on the market environment you might give back all your winnings it really depends on the situation.
Quoting faure
We all hate losses and naturally avoid them; likewise everybody loves a winner. The problem is that this kind of thinking leads to holding onto losers and cutting winners - maybe that's why it's so hard to follow the old trading axiom, "cut your losses and let your winners run". This isn't the only, or even the best way to trade but there is logic behind it. It seems simple enough and makes sense.

[font=Veranda]The answer could be to change the way you think about losses; more specifically, love your losses....
  • #50
  • Feb 9, 2010 12:32pm Feb 9, 2010 12:32pm
Quoting NRTMaster
the key is not necessarily always letting your winners ride, because depending on the market environment you might give back all your winnings it really depends on the situation.
Trying to get this.

A trade's reasons define the situation for the trader, and an off awareness of the trade area's possibilities changes which (device) and where (TF) to interpret for the reason:

Cut losses early when the trade's reason makes too small a profit to catch,
and let your winners run when there is more of, or a bigger, reason than you at first thought.

Of course, if a trade's reason covers a large area to travel, a somewhat randomly calculated stop or limit is in order.
  • #51
  • Feb 9, 2010 12:56pm Feb 9, 2010 12:56pm
Quoting faure
We all hate losses and naturally avoid them; likewise everybody loves a winner. The problem is that this kind of thinking leads to holding onto losers and cutting winners - maybe that's why it's so hard to follow the old trading axiom, "cut your losses and let your winners run". This isn't the only, or even the best way to trade but there is logic behind it. It seems simple enough and makes sense.

[font=Veranda]The answer could be to change the way you think about losses; more specifically, love your losses....
THIS IS trully right brother.. lets remain it to ourself...
I draw a line for u... a support line.. not a resistance one..
  • #52
  • Feb 9, 2010 3:29pm Feb 9, 2010 3:29pm
Quoting WTB
Most of the time, cutting your winners short is a problem of panic'ing mid-trade through and bank those few pips in "just in case". That's where the importance of having a sound Trade Plan with your exit levels clearly defined comes in place, and then of course having the discipline to stick to that trade plan.
I'm new to trading been reading these boards some people say to keep tight stop losses and some people say to stick with trades longers. What do you guys recommend? Thanks
  • #53
  • Feb 9, 2010 6:44pm Feb 9, 2010 6:44pm
Quoting Gidyup
I'm new to trading been reading these boards some people say to keep tight stop losses and some people say to stick with trades longers. What do you guys recommend? Thanks
Hi - see post #44 in this thread - it provides a basic answer to your question.

Cheers.
  • #54
  • Feb 10, 2010 12:06am Feb 10, 2010 12:06am
Quoting Gidyup
I'm new to trading been reading these boards some people say to keep tight stop losses and some people say to stick with trades longers. What do you guys recommend? Thanks
just try out all possible scenarios yourself. i have kept tight/not tight stop losses for 6months and blew all my accounts. right now with the no stop loss unless pushed to the extreme, i am currently happily sitting 60% up on my acct(even when my pips are -ve which is quite alot i guarantee u). its never about pips. so no point chasing pips. chase the $$$ itself!

and all this talk about the trend is your friend is truly bullcr*p but thats my personal opinion. to identify trends, u have to use lagging indicators. and once ur lagging indicators give u the entry signal(which probably take 1/3-1/2 of a starting trend to identify) u are already in NO MAN's LAND. mid way through the trend, the trend starters aka pros are already starting to dump their position slowly. what are u gona play for? wave 5?

im guessing every1 is a trend lover here. but for me trend trading + stop losses have blown my acct in 6months. no stop losses + countertrend trading so far im up 60% these 2months.

to each his own. mayb my personality just wouldnt fit that trading style. i only know insanity is to do the same thing over n over again n expect a different result. if it aint working CHANGE UR SYSTEM/STYLE
  • #55
  • Edited 2:29am Feb 14, 2010 2:18am | Edited 2:29am
Everyday i look at daily candles, i see it, huh, there some candles bigger than the other, i mean the body (open and close) you get it? i can buy or sell for whatever, but i will put my stop above high or under low, without the take profit, and i will take profit when the day end.

The situation is:

My losses are always limit, because i set it before
My winnings are unlimited, because there are days those are bigger than the yesterday

You sense it, it's easy and i don't need to be a good charter or expert, just click buy or sell and set some limit orders on platform, but i bet just a few people can do it, because that's where they have to fight with the question: how to cut loss short and let profit run without emotions...

So the solution is:

Know your weapon and
Keep no emotion

and that means trade with appropriate position

and i mean you should read the book "Trade your way to financial freedom"
Back to the beginning ... demo
  • #56
  • Edited 9:55pm Feb 20, 2010 9:23pm | Edited 9:55pm
Quoting goldtrader
Everyday i look at daily candles, i see it, huh, there some candles bigger than the other, i mean the body (open and close) you get it? i can buy or sell for whatever, but i will put my stop above high or under low, without the take profit, and i will take profit when the day end.

The situation is:

My losses are always limit, because i set it before
My winnings are unlimited, because there are days those are bigger than the yesterday

You sense it, it's easy and i don't need to be a good charter or expert, just click buy or sell and set some limit...
The image is getting clearer. I understand you enter, set the stop loss and come back at the end of the day to see if you have a profit or not. If you have a fixed risk per trade, you determine the stop loss trigger by looking at the high or low and then calculate your position size - am I close?

Question - at the end of the day, if the trade is still open, but negative do you close or let it ride another day?

You have given me something to work on.

http://i1016.photobucket.com/albums/...er/chart-3.gif

Enter long at open. green histo bars show plus pips, red show negative pips and no bar means trade still open but negative.
  • #57
  • Feb 21, 2010 2:12am Feb 21, 2010 2:12am
Quoting goldtrader
...
It doesn't work, it is too simple. There are programs which try all the possibilities that you can imagine and if it would be an edge in some breakout of a daily candle they would have already taken advantage of it.
  • #58
  • Feb 21, 2010 6:31am Feb 21, 2010 6:31am
Quoting tjfxtrader
The image is getting clearer....
I mean each day you can choose a buy or sell based on the previous candle, not enter both buy and sell, if previous candle up you buy, down you sell, neutral you do nothing, you can filter with some candle in same range then you have no trade, you wait until a candle close outside then you enter

"Question - at the end of the day, if the trade is still open, but negative do you close or let it ride another day? ":

End of day if it negative but the candle is neutral you can choose to trail stop to high or low of that candle, or you can close it to limit your loss (like in case it is a doji and it's leg is long)
You can keep the positive trade if you want and you trail it's stop to low/high and it works well on trending market, but in ranging market, you should closed it.
Back to the beginning ... demo
  • #59
  • Feb 21, 2010 9:29am Feb 21, 2010 9:29am
from the other thread on here:

yes, but what do you mean by negative component? all your doing is adding components or units to the position as it goes in your favour at different intervals, i bet you most of the systems on this forum have statistacally relatively the same win percentage but the results are radically different because of the position sizing not including psychological factors of course....

i also bet you if i used my position sizing on any of the half decent systems on this forum in the end i would still make money, my current system is only 45% win accurate but its my position sizing( and psychology) that lets me stay in the game during my losing streaks and its position sizing that allows me to win big when i catch those trends, my wins far outweigh my little losses at the end of the month, and i believe thats what trading is all about, so in reality, i have more losers than winners at the end of the month but my winners are far greater than the losers...the difference in the way you use position sizing has a radical effect on your results....

starting off with full positions is krazy in my opinion, you should add to these positions once the trade has proven itself and as soon as a loser is identified, chop it off immediately, and of course the loser will be only a quarter position so your really not losing that much so therefore you can take many losses and not really feel it...the faster traders realise this the faster they will start seeing success in there trading....

Phorex Phreak
  • #60
  • Edited 10:35am Feb 21, 2010 10:15am | Edited 10:35am
Quoting goldtrader
I mean each day you can choose a buy or sell based on the previous candle, not enter both buy and sell, if previous candle up you buy, down you sell, neutral you do nothing, you can filter with some candle in same range then you have no trade, you wait until a candle close outside then you enter
[i]
"Question - at the end of the day, if the trade is still open, but negative do you close or let it ride another day?...
I understood not to enter both buy and sell. I charted buying at the open each day. Let me try again.

http://i1016.photobucket.com/albums/...er/chart-4.gif

Buy at open if previous candle was green and sell at open if previous candle was red. Dark green and dark red show the short trade. Bright green and bright red show the long trade.

Can you elaborate on: " you can filter with some candle in same range then you have no trade, you wait until a candle close outside then you enter"? Thank you.
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