Stepping out of a position

I'm just wondering: if the trade you put in goes against you and you find out at the point where you have made a big loss already do you stop that trade regardless or do you hang on?

I am wondering this because I have been in situations where I put in a short, convinced it would go down but instead the price kept on a steady move upwards. This has happened a number of times in the last few days. In the end I hung on to my trades and eventually they went down and I made a profit. Is it better to stop the trade (even with a loss) or hang on to it?

I stop the trades that go against my plan. I use stop-loss for that.

Yeah I guess that makes the most sense. I put in these orders too quick I guess (convinced I'm doing the right thing)....

SL if you have a plan, but what if not?
Where to put the SL? - if is to close than that is the problem, if is to far than that is the problem.

At some brokers can be hedged, and I am experimenting with position "correction". Has a smaller chance for bigger drawdown.

EDIT:
Right now I remember a post in other site: "If you don't know where should be your SL, than you shouldn't enter in that trade!" man... I have read this a few years ago and forgot, just remembered, that explains a lot!

it is actually not a simple proposition...

prematurely stop your position and you decrease your win loss ratio and quick fingers give you less profit to loss ratio also when in profit thus violating the rule of make more than you lose.

hang on to that position and watch it go deeper and deeper in the sh*tter.

if you are going to sell at 1.2950 why not sell now at 1.2990? right why keep increasing the loss.

so how to tackle this dilemma?

not an easy thing to do ...but it will better for you if you start to think in terms of volatility how volatile is the instrument you are trading? then you can ask yourself where should my stop be away from volatility yet within my risk parameters?

lets face it if you put in a trade it is hard enough getting the direction right, now you add the timing, and volatility and you get killed.

so lax enough to let it breathe yet close enough to keep your winners bigger than your losers.

the closer the stop the riskier it is as stop out will kill you
the more distant the stops the riskier it is as the Var is greater (assuming same position size)

where is the middle?

See, obviously I'm not the only one...

I did hang on to the trades, but I have become so careful now that I'm sometimes afraid of making the wrong decision (and not put in a trade at all). This feeling kinda sucks and I'd like to go back to the ignorant feeling of putting a trade knowing that I'm doing the right thing. Which, I know, sounds a bit childish. I put in a few trades now with s/l and that has helped me so far.

For every 100 trades where you practise this there will be the 1 that doesnt come back that you add to that doesn't come and suddenly you face ruin.

Years ago when I first started learning I met a person who over a short period of time amassed over 1 million dollars trading much the same way although he martigaled at times aswell, usually after the first few trades when against him so essentially he need to average down his position. Well that worked during a strong trend but once he got caught near the peak it was pretty much game over, he never realised his losses as time and time again his method worked out and with a few weeks he was margin called.

If your looking a chart from a distance, you should have a clear idea of when your wrong, at which point you take the loss on the chin and move on. Every trader will trade their way, but a SL is your security. It hurts yes, but nothing is more damaging that continually profiting from mistakes ie, you enter short and it moves against, you enter short again and it still is moving against you. Just because a position finally moves in your direction doesn't make you right. It might do on the trade that actually works but then that trade will likely be a result of the system of averaging loosers.

So my advice, trade with a SL at areas where you know you will be wrong, that your plan has failed on this occasion and be prepared to cut a loss short if the signs are pointing it out, ie don't take a full bar loss when the signs are obvious. Protect your capital.

1) trade small
2) no SL
3) manage open losses the same as open wins.

Good advice...
I think I got a bit overconfident as well.

Hang on to it (it is cheap, unless you are dealing with AUD or other big rates) BUT... go the other way some 30 pips from the first trade.
If price goes a long way away from you first, take the second trade out at Break-even +3 in the return.

If goes a few pips ... let the 2 trades be... (think there are not there, that is a loss) and look for another entry.

When another entry come according to "your" strategy or reasoning...
Choose to a) make a new entry b) take the one that is in profits... only if and only, closing that trade leave you with one net position in the way you want to be... it does not matter if that position is at loss or you close it at a loss later on because you recovered some pips.

IT is kind of insane to let go trades to long away from entry without stooping the loss between recoverable pips.

J.

I think this is quite a common issue we all face.

My way of handling it will be either depend on the max drawdown I am comfortable to lose or converting the trade to a higher TF trade.

Eg, I entered a short based on 5mins or 15mins, but it went up. I will look into hourly and daily chart if the short entry valid, if so, I will hold this trade, and adjust the SL to accommodate this noise for my personal hourly or daily system.

Never ever enter a trade where you don't know your exits (Win or Loss). It will create stress and it will cloud your judgement.

It doesn't mean that when you have a loss, it was a wrong decision, take the loss and move on. Never fight the market, you'll never win. Go with the market, at least that's my motto.

To put it bluntly this is not an easy answer...

Look at it this way....

#1 Say you have 100 trades of those trades 80 of them stop out for a small loss and 20 of them hit for small gain.

Overall a net loss. Paper cuts = death eventually.

#2 Say you have 100 trades of those trades you have 90 small wins and 10 big losses.

Overall a net loss. Band aids don't work in a knife fight = Death.

#3 Make a plan, trade your plan. It has to be your plan so you know what to do when it goes wrong. Plan for it to go wrong often... because it will go wrong.

If you hit 40% profits with good RR ratios you should win depending on swaps. Typically you need a 3:1 RR to do well in a 40% win type system. Even with systems such as these there is always a possibility for a "black swan" event. The bigger your bankroll and less risk you employ the better your chances. (BUT DO NOT USE A BIG BANK ROLL FIRST STARTING OUT.)

Prepare for anything and everything.

If you can hit 70% and higher profits things will be a bit different. But even then you can hit turbulence once in awhile.

Forget about hitting 100% it can never be done for very long and it sets you up for failure. Take what you know you can get and get out... be happy with what you got (provided you are winning.)

I always make sure I a SL and TP in place worked out on the strategy I use.

But in a few trades recently i've seen my trade's either go one away from TP and drop away or bounce off the SL and then continue on up or down and would've hit the TP.

I'm sticking to my guns with it though, it can be painful but it's just one of those things, and the other times it's come good and it's broken the TP and it's all been fine. I reckon if i started making decisions on the spare of the moment, and adjusting my SL and TP on the fly, i'd end up suffering. Trade the plan!

If I don't place stop loss by mistake then I will not stop the trade and will hedge to make constant the loss as my broker allow direct hedging.

That’s absolutely true. New trader should focus on learning rather than make money.

The way I see it, focusing on learning is focusing on profit, even if the profit is delayed.

One of them is just learning and familiarizing himself with the topic. The other acts on it and thus pays dearly expensive money.
There is no holy grail to copy. Therefore, in the end, only those who have learned from their mistakes or who have previously looked at the mistakes of others and do not make these mistakes expensive on the market will act successfully.
I use invisible SL with my actually values and I have a visible SL in my orders with a higher SL value as a emergency trade exit if the market goes crasy or the internet ist to slow for sending my trade exit to the broker just in time. Most of the trades where closed by my invisible SL.