Trouble Holding On To A Position?

[Soultrader 12]

Trouble Holding On To A Position?

 

All traders are guilty of exiting a winning position too quick. We fear the loss of paper profits or perhaps we trade our P&L instead of our charts.

 

Whatever the reason, holding on to a position requires discpline and most of all a set target in mind. Many new traders tend to exit a winning position too quick just to re-enter and end up chasing the markets. How can one prevent this?

 

Couple of interesting questions pop up in my mind. As intraday traders its good to have daily, weekly, and monthly goals. Are you capable of managing a position throughout the entire day? Do you prefer to set specific goals on a intraday basis? Some traders would rather take 2-3 ES pts then stick around until the close to manage a position. What does your personality tell you?

 

Scaling Out

 

Scaling out is a method I use to help me control my greed and fear. With defined exit targets for portions of my position, I am able to hold on to the last quarter position. For example, if a trader is trading 2 contracts, his first exit target should be 10-15 YM pts. Once this is hit he can then bring his stop to break even and try to ride with the remaining contract.

 

Thus scaling out helps manage a trade psychologically.

 

Understanding What "They" Are Doing

 

Its the big traders that really move the markets. So what are they watching at? Big traders and floor traders who make up most of the volume watch for key price levels. Its fascinating to see the markets travel from one pivot to the next. This is how the markets behave.

 

New traders need to hold a stronger belief in their methods. If price breaks a pivot and the previous days low is 20 YM points below it, expect "them" to bring it down to this level. The markets like to test key levels to see if there are buyers or sellers at these levels. If not, "they" will take it down to the next line of pivot.

 

In the chart below, notice the break of price from the value low pivot. Where can you expect prices to travel next? Answer: the previous days low. This is typical market behavior. Always know where your next line of S&R and this will help you hold onto a winning position.

 

 

The markets don't just reverse at random price levels. They will test key levels. Afterall, we are not trading the markets. We are trading other traders. At what levels are the big players looking at?

[Soultrader 12]

Thats definitely on my list of things to do.

[Reaver 10]

Looking forward to it brother. I'll be at the top of the pre-order list.

[namstrader 10]

I will preorder 10 copies. 1 for each room. Lots of wisdom and humility from ya Soul, and I really appreciate your site.

[keymoo 10]

I'll pre-order your book, for sure.

[Jakew 10]

Excellent article from start to finish!

 

Scaling out as a psychological tool, and not just a purely technical/mathematical device - very insightful.

[wow 10]

I've learned from a trader in othernet IRC chat room by using projection of 3X to 5X versus Risk as an exit point, followed by trail stop. Works pretty fantastic.

[brownsfan019 17]

I've learned from a trader in othernet IRC chat room by using projection of 3X to 5X versus Risk as an exit point, followed by trail stop. Works pretty fantastic.

 

Feel free to share wow - we've had plenty of threads around here on exit strategies.

[ajhunter 10]

Glad to see the article. It's coming at the right time as I definitely have trouble holding on to a position. My entries are quite good, I just never believe price will extend as far as it does. Dedicated all of September to working on my exits.

 

Love the site. Has definitely improved my trading.

[Soultrader 12]

Glad to see the article. It's coming at the right time as I definitely have trouble holding on to a position. My entries are quite good, I just never believe price will extend as far as it does. Dedicated all of September to working on my exits.

 

Love the site. Has definitely improved my trading.

 

If trading in multiple lots, scaling out will help you stay on a trend. For me scaling out helps psychologically and have been able to capture good amounts of an intraday trend.

[wow 10]

Feel free to share wow - we've had plenty of threads around here on exit strategies.

 

I traded only one emini sp at a time and just started two contracts per side last month.

What I learned from the gentleman was his peculiar trading concept treated every entry as part of casino betting. That is:

Any entry is a bet and should accompany with stop. Period.

Any opened position must set a target with at least 3X reward versus risk exposure.

The bracket is fixed, right or wrong. Changes allow only when the position is in your favor. He calls it trail stop. A trail stop activated only if entry price move into 1/3 of objective targeted price.

 

I am still try to understand when he said 'extension in exceptional range' when market volatility increases.

 

I suspicious he's a Market Profiler because he talk a lot of value Long or value Short. Something I don't understand and sounds foreign to me.

 

With his way of trading, turned me around the last 5 months from consistent losing months after months for almost 17 months. Not perfect, but no complaints.

 

He has a free blog at myspace.com/no_nom

[MC 10]

Great input. I'm only on paper at the moment but I can tell you when I started to scale out it made all the difference in the world. It's like having a free shot at the bonus spin on The Price is Right.

 

Thanks for the great site and info.

[404 10]

Good read. This is what I am dealing with currently. I have been having solid entries, and have been scaling out at a certain point gain, say 1-2 points. Then I will move my stop up, but I still find myself selling the final portion after another point or two. I see the profits, and I am quick to sell and book the profit. I tell myself not to be greedy, but then I will often see the trade continue to go in my favor another few points.

 

I guess it is the question of how much you want to squeeze out of the trade. Soul said that having a target helps, and I am working on that. I do think that having a soft target where you think price is going, will help to hold on. But it is still tough to watch a few retracements and seeing your trade profit ride the wave...

 

Solid article...