Stepping down from a position

[ChrissyWilkinson 15]

I'm just curious: if the trade you put in goes against you and you find out at a point where you've already lost a lot of money, do you stop it or do you keep it?

I'm curious because I've been in situations where I've put in a short, expecting it to go down, but instead the price has continued to rise steadily. In the last few days, this has happened several times. In the end, I held on to my trades, and they eventually went down, resulting in a profit. Is it better to exit the trade (even if it's a loss) or to keep it going?

[CouchFattyFriend 9]

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

 

 

 

 

 

 

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[KuIng 6]

What should I do with the SL? - If it's too close, it's a problem; if it's too far, it's a problem.

Some brokers allow you to hedge your positions, and I'm currently experimenting with position "correction." Has a lower chance of experiencing a larger drawdown.

Right now, I'm reminded of a post on another site that says, "If you don't know where your stop loss should be, you shouldn't enter that trade!" man... I read this a few years ago and forgot about it until now, which explains a lot!

[PeppeeExcuse 34]

It is not, in fact, a simple proposition...

Stopping your position prematurely reduces your win-loss ratio, and quick fingers give you a lower profit-to-loss ratio even when in profit, thus violating the rule of making more than you lose.

Hold on to that position and watch it sink deeper and deeper into the muck.

Why not sell now at 1.2990 if you're going to sell at 1.2950? Why continue to increase the loss?

So, how do we solve this conundrum?

It is not an easy task...but it will benefit you if you begin to consider volatility. How volatile is the instrument you are trading? Then you can ask yourself, "Where should my stop be to stay away from volatility while still staying within my risk parameters?"

Let's face it, it's difficult enough to get the direction of a trade right; add in the timing and volatility, and you're doomed.

so lax as to allow it to breathe while remaining close enough to keep your winners bigger than your losers

The closer the stop, the riskier it is because stopping will kill you; the further the stop, the riskier it is because the Var is greater (assuming same position size)

Where is the center?

[ZariaPr3tty 58]

For every 100 trades where you practice this, there will be one that does not return that you add to that does not return, and you will face ruin.

Years ago, when I first started learning, I met someone who amassed over a million dollars in a short period of time trading much the same way, though he martigaled at times as well, usually after the first few trades went against him, so he essentially needed to average down his position. That worked during a strong trend, but once he was caught near the peak, it was pretty much game over; he never realized his losses because his method worked time and time again, and within a few weeks he was margin called.

If you're looking at a chart from a distance, you should be able to tell when you're wrong, at which point you take the loss and move on. Every trader will trade their own way, but a stop loss is your safety net. Yes, it hurts, but nothing is more damaging than profiting from mistakes, such as entering short and having it move against you, then entering short again and having it move against you. Just because a position finally shifts in your favor does not make you correct. It might work on a trade that actually works, but that trade will almost certainly be the result of the system of averaging losers.

So, my advice is to trade with a stop loss in 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 point it out, ie don't take a full bar loss when the signs are obvious. Keep your money safe.

[AniyaHopper 18]

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

 

 

 

 

 

 

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[AnimeSalt 21]

18 minutes ago, ChrissyWilkinson said:

I'm just curious: if the trade you put in goes against you and you find out at a point where you've already lost a lot of money, do you stop it or do you keep it?

I'm curious because I've been in situations where I've put in a short, expecting it to go down, but instead the price has continued to rise steadily. In the last few days, this has happened several times. In the end, I held on to my trades, and they eventually went down, resulting in a profit. Is it better to exit the trade (even if it's a loss) or to keep it going?

Hold on to it (it's cheap unless you're dealing with AUD or other big currencies), but go the other way about 30 pips from the first trade.
If the price moves away from you quickly, take the second trade out at Break-even +3 in the return.

If it moves a few pips... leave the two trades alone... (if they aren't there, that's a loss) and look for another entry.

When another entry comes according to "your" strategy or reasoning... choose to a) make a new entry or b) take the one that is in profits... only if and only if closing that trade leaves you with one net position in the direction you want to be... it makes no difference if that position is at loss or you close it at a loss later on because you recovered some pips.

It's insane to let go of trades that are too far away from entry without stooping the loss between recoverable pips.

[FireGay 12]

This, I believe, is a fairly common problem that we all face.

My approach will be determined by the maximum drawdown I am willing to accept or by converting the trade to a higher TF trade.

For example, I entered a short film with a time limit of 5 or 15 minutes, but it was accepted. If the short entry is valid, I will look at the hourly and daily charts and adjust the SL to accommodate this noise for my personal hourly or daily system.

[UltraHater 67]

Never enter a trade if you don't know how to get out (Win or Loss). It will cause you stress and impair your judgment.

It doesn't mean that if you lose, it was a bad decision; instead, accept the loss and move on. You'll never win if you fight the market. At least that's my motto when it comes to the stock market.

[FinnHe 62]

24 minutes ago, ChrissyWilkinson said:

I'm just curious: if the trade you put in goes against you and you find out at a point where you've already lost a lot of money, do you stop it or do you keep it?

I'm curious because I've been in situations where I've put in a short, expecting it to go down, but instead the price has continued to rise steadily. In the last few days, this has happened several times. In the end, I held on to my trades, and they eventually went down, resulting in a profit. Is it better to exit the trade (even if it's a loss) or to keep it going?

To put it bluntly, the answer isn't simple...

Take a look at it this way:

#1 Assume you have 100 trades, 80 of which stop out for a small loss and 20 of which hit for a small profit.

In the end, there was a net loss. Eventually, paper cuts will lead to death.

#2 Let's say you have 100 trades, with 90 small wins and 10 large losses.

In the end, there was a net loss. In a knife fight, bandages don't work = death.

#3 Make a plan, then trade it. It must be your plan so that you will know what to do if something goes wrong. Expect things to go wrong frequently... because they will.

Depending on swaps, if you hit 40% profits with good RR ratios, you should win. In a 40 percent win system, you typically need a 3:1 RR to do well. Even with systems like these, a "black swan" event is always a possibility. Your chances are better if you have a larger bankroll and take fewer risks. (However, DO NOT START WITH A BIG BANK ROLL.)

Make sure you're ready for anything.

Things will be different if you can hit 70 percent and higher profits. Even so, turbulence can occur from time to time.

Forget about hitting 100 percent; it's impossible to maintain for long periods of time and it sets you up for failure. Take what you can and get out... be content with what you have (provided you are winning.)