How do people take profits?

[Splitlink]

i must confess, even at this early stage of my learning, i am sceptical of signal generators. though i cannot define why, my feeling towards them is always negative, maybe its something to do with me not being happy with things that i am neither in control of nor understand!

You do not like signal generators because they are not your signals. You might be happier using your own entry and exit points based o your own observations. Whatever you do, any entry point will probably be based on historical data. It's cheaper to use your own. 🙂 However, once in the trade, it is a different ball game. Something like riding one of those bulls at a fairground. I try to use a target but, I admit, quite often decide to take profits. At least, I'm still trading! Whatever you do, Good Luck with it.

 

[munchiedude]

You do not like signal generators because they are not your signals. You might be happier using your own entry and exit points based o your own observations. Whatever you do, any entry point will probably be based on historical data. It's cheaper to use your own. 🙂 However, once in the trade, it is a different ball game. Something like riding one of those bulls at a fairground. I try to use a target but, I admit, quite often decide to take profits. At least, I'm still trading! Whatever you do, Good Luck with it.

🙂 totally agree with the above splitlink, i think using third party signals is not individualised. im sure there are profitable signal generators out there and plenty of people using them however, its one thing to lose money from others signals and another thing to lose money from your own mistakes/decisions. i'd prefer the latter 🙂

 

[barjon]

hi barjon,

thanks for sharing the way you do it, its insightful and interesting. undoubtedly, you are much more experienced than me as shown by your methods. would i be correct in saaying that you hedge as well as cancel and replace s/l? or you simply leave the original stop loss there and place hedge positions when price moves to our target zone?

i do find it interesting to hedge the position rather than simply cancel and replace as then it would lock in a profit as well as offset against a reversal.

Munchie

More or less - I didn't want to complicate what I said too much 🙂 I will have moved my stop-loss before price reaches the target zone when I have made an addition or when price action suggests it (usually a minor swing low on the way up if I'm long). I will also move my stop-loss when I take the hedge off to where it would be be if it was a "new" trade taken at that time. Hope that makes sense.

Just to complicate matters even further I sometimes use a hedge instead of a stop-loss in the first place, but that's another story 😀

By the way, the hedge is put on when price comes back out of the target zone not when it gets to it.

If you can find an appropriate hedging vehicle for the instrument(s) you trade it's worth investigating. You often find that the net result of the hedge itself is profitable. For example, if my long is with a strongly performing share it is quite likely that it will go up faster than the index if the market rises or go down less severely than the index if the market falls - and vice versa if I'm short.

jon

 

[gurutrader1]

that seems a very mechanical way to do it, although if its profitable then i guess why not.

why not hand your money over to an fx manager to discretionary trade on your behalf if that were the case? as you would be doing all the work and wouldnt necessarily be learning anything new by trading their signals as i assume they do not tell you how they generate their signals?

i must confess, even at this early stage of my learning, i am sceptical of signal generators. though i cannot define why, my feeling towards them is always negative, maybe its something to do with me not being happy with things that i am neither in control of nor understand!

how has the system been performing for you if you dont mind me asking?

I can understand where you're coming from. However, you seem to be an emotional trader, not a displined trader. First of all, you've got to ask yourself - why do you trade and what do you trade for? If you just want to have some fun and not trade for the money; then I will totally agree with you. But if you want to make some money, then I disagree.

Maybe there are too many bad signal generators that ruin the reputation of this method. But a good signal generator should be respected as it is rare and hard to get. The human brain can't scan a whole bunch of parameters at a click; whereas a software's capacity extends to more than ten folds.

It's just like how a carpenter needs a hammer, a writer needs a dictionary, a good trader with a good signal generator can achieve at least several times more chances to win. You don't have to follow all the signals if your judgement is better than the signaller, but you still can use these signals as your trading reference for your analysis.

Through my own experiences, the multi cross hedging techniques from the generator at indextradings.com actually works for me.

 

[munchiedude]

I can understand where you're coming from. However, you seem to be an emotional trader, not a displined trader. First of all, you've got to ask yourself - why do you trade and what do you trade for? If you just want to have some fun and not trade for the money; then I will totally agree with you. But if you want to make some money, then I disagree.

Maybe there are too many bad signal generators that ruin the reputation of this method. But a good signal generator should be respected as it is rare and hard to get. The human brain can't scan a whole bunch of parameters at a click; whereas a software's capacity extends to more than ten folds.

It's just like how a carpenter needs a hammer, a writer needs a dictionary, a good trader with a good signal generator can achieve at least several times more chances to win. You don't have to follow all the signals if your judgement is better than the signaller, but you still can use these signals as your trading reference for your analysis.

Through my own experiences, the multi cross hedging techniques from the generator at indextradings.com actually works for me.

hi gurutrader,

its great that you have found a signal generator that works and best of luck in that respect. i do agree that there are many dodgy vendors out there that may have ruined the reputation on such vendors in this area which leads to traders to be understandably cautious.

as to the assumption to me being an emotional trader, i would disagree with that point. i actively try to disassociate my emotions from trading as i know that it is the killer when it comes to trading and can often undo many traders if they do not conquer their own fears and greed.
i have reservations with signal generators for the following reasons:
1) i believe trading to be a skill that, once acquired, can be honed to such an extent as to make money similar to my experiences of poker where i am consistent. here, i believe that following a signal generator takes away much of the skill and with all due respect, much of the judgement and knowledge required to apply those skills and as such, my 18 year old sister with no experience of the mkts can simply follow instructions to make money, and i doubt it would be that easy.

2) using signal generators, i place much faith of my hard earned money in the hands of those that send me signals, its one thing to lose my money with my own mistakes, but its another thing to lose money from other's mistakes.

3) what happens when/if the signal generator that has been providing me with profitable results for years and the income from trading that i rely on for years suddenly goes out of business? then i will have not acquired any skills in that duration, find myself still relying on the income and starting from scratch to either look for another generator or learn myself, this reliance, in my opinion, is frankly a daunting prospect for me.

altho, im not knocking what you say, and no offense meant in this post. its just my view on things and at this early stage of trading for me is worth expressing i suppose!

just my 2 pips 🙂

 

[gurutrader1]

Munchie

More or less - I didn't want to complicate what I said too much 🙂 I will have moved my stop-loss before price reaches the target zone when I have made an addition or when price action suggests it (usually a minor swing low on the way up if I'm long). I will also move my stop-loss when I take the hedge off to where it would be be if it was a "new" trade taken at that time. Hope that makes sense.

Just to complicate matters even further I sometimes use a hedge instead of a stop-loss in the first place, but that's another story 😀

By the way, the hedge is put on when price comes back out of the target zone not when it gets to it.

If you can find an appropriate hedging vehicle for the instrument(s) you trade it's worth investigating. You often find that the net result of the hedge itself is profitable. For example, if my long is with a strongly performing share it is quite likely that it will go up faster than the index if the market rises or go down less severely than the index if the market falls - and vice versa if I'm short.

jon

I can't agree more. The hedging method is amazing. Sophisticated traders even use multi hedges and cross hedges in order to reduce their risk - and that's what I'm using atm.

 

[gurutrader1]

hi gurutrader,

i have reservations with signal generators for the following reasons:
1) i believe trading to be a skill that, once acquired, can be honed to such an extent as to make money similar to my experiences of poker where i am consistent. here, i believe that following a signal generator takes away much of the skill and with all due respect, much of the judgement and knowledge required to apply those skills and as such, my 18 year old sister with no experience of the mkts can simply follow instructions to make money, and i doubt it would be that easy.

2) using signal generators, i place much faith of my hard earned money in the hands of those that send me signals, its one thing to lose my money with my own mistakes, but its another thing to lose money from other's mistakes.

3) what happens when/if the signal generator that has been providing me with profitable results for years and the income from trading that i rely on for years suddenly goes out of business? then i will have not acquired any skills in that duration, find myself still relying on the income and starting from scratch to either look for another generator or learn myself, this reliance, in my opinion, is frankly a daunting prospect for me.

altho, im not knocking what you say, and no offense meant in this post. its just my view on things and at this early stage of trading for me is worth expressing i suppose!

just my 2 pips 🙂

Hi munchiedude,

I must admit that you do have very good reasons there. I would just like to contribute to the discussion by following your thinking. What you did imply is that one will lose ones learning skill once using a signal generator. I disagree on that.

It's actually quite the opposite. I learn much quicker with it than by learning by my own mistakes. Good signallers actually teach people how to enter into a trade and when to exit out of a trade. After you follow their strategies for a long while, you actually learn much more. Learning from one guy can only obtain some skills, and learning from a system you can obtain systematic, consistent skills. Which way do you think is better?

 

[Shakone]

Ok, Jason, I don't approve of that from a business plan perspective 🙂 but just review what happens to your trades after that first exit. If, most of the time price goes on to higher things, then you'd probably do better holding on to the full position. If, most of the time price falls further and further away, then you'd probably do better by having closed the full position in the first place. If, most of the time price goes nowhere, then you'd probably do better having closed the full position and using the profit to trade a more active trend.

Same as I said in a different thread on the topic, I'm not sure that running your winners is all about hanging on to a single trade (or part of it) through thick and thin, suffering mouth-watering retracements and tying up capital/margin whilst those retracements work themselves out.

To my mind it's about riding a trend with a variety of trades once you're off and running. Sensible additions, exits and re-entry, hedge on and off etc, etc. The important thing is to stick with the trend you've got, not necessarily the individual trade(s) that you put into it.


jon

I don't really understand this. It seems fine to me from a business perspective to not have a fixed target. If you're in the business of buying things and selling them for a profit, then of course you have an acceptable price you're willing to trade at, but if someone offers you more, then why not take it. You don't know beforehand how much the market will offer you, just a rough idea of the minimum you'd be willing to accept.

Also on Van Tharp's comment about scaling out. He says that when you lose, you lose full position, but your biggest winners will have smaller stakes upon scaling out. Well I understand the point, but it seems to ignore that actually if you scale out a part of your position, your losses are more often than not far less than full position. Not only is a fraction of your position not going to be a loser, but it's profit is also going to offset some of the loss. Taking a quarter off your position at 1:1 Risk Reward, will cut many of your losers to half postion loss.

 

[munchiedude]

Hi munchiedude,

I must admit that you do have very good reasons there. I would just like to contribute to the discussion by following your thinking. What you did imply is that one will lose ones learning skill once using a signal generator. I disagree on that.

It's actually quite the opposite. I learn much quicker with it than by learning by my own mistakes. Good signallers actually teach people how to enter into a trade and when to exit out of a trade. After you follow their strategies for a long while, you actually learn much more. Learning from one guy can only obtain some skills, and learning from a system you can obtain systematic, consistent skills. Which way do you think is better?

hi gurutrader,

of course, learning from a consistent system is far better than the indivualistic skills of another trader, as i do believe trading can be a very individual thing where 2 traders trading the exact same system can yield very different results determined by their own greed/fear/aspirations/monetary goals.

having not used a signal system my knowledge of it is limited. my previous post's points were based on the assumption that the signal provider does not reveal the strategies that trigger the signals used to buy and sell. i would assume that that would be the case as if they revealed the whole system of how they generate these signals then there would be no more reason why you would use them again when you can learn it and keep all profits for yourself?

there are certainly pro's and con's to using signal generators and i think its a personal choice when it comes to using it.

altho, with the way my trading has gone so far, i wouldnt mind a bit of mentoring lol

 

[Splitlink]

Hi munchiedude,

I must admit that you do have very good reasons there. I would just like to contribute to the discussion by following your thinking. What you did imply is that one will lose ones learning skill once using a signal generator. I disagree on that.

It's actually quite the opposite. I learn much quicker with it than by learning by my own mistakes. Good signallers actually teach people how to enter into a trade and when to exit out of a trade. After you follow their strategies for a long while, you actually learn much more. Learning from one guy can only obtain some skills, and learning from a system you can obtain systematic, consistent skills. Which way do you think is better?

I agree with munchidude because I am a bit of a loner, in trading. You, too, have a point, though.

Starting with a signal provider may be a good way to start trading but, after a reasonable time, the trader should have been able to fend for himself.

 

[barjon]

I don't really understand this. It seems fine to me from a business perspective to not have a fixed target. If you're in the business of buying things and selling them for a profit, then of course you have an acceptable price you're willing to trade at, but if someone offers you more, then why not take it. You don't know beforehand how much the market will offer you, just a rough idea of the minimum you'd be willing to accept.

Also on Van Tharp's comment about scaling out. He says that when you lose, you lose full position, but your biggest winners will have smaller stakes upon scaling out. Well I understand the point, but it seems to ignore that actually if you scale out a part of your position, your losses are more often than not far less than full position. Not only is a fraction of your position not going to be a loser, but it's profit is also going to offset some of the loss. Taking a quarter off your position at 1:1 Risk Reward, will cut many of your losers to half postion loss.

Shakeone

OK, I know nothing is certain in life, nor as clear cut, but bear with me. From a business perspective you know that you need £x profit a year for it to be a viable proposition. You know from past experience (which is no guarantee, of course 🙂) that you are sure to achieve that if you take 2:1 on your trades. You also know that you might do much better than 2:1 if you hang on but, coupled with it, that you might finish up with less. So, again from a business perspective, if you are risk averse you will look for the greater certainty (or least uncertainty), take your 2:1 and look for an opportunity to take another 2:1 bite out of the trend with another trade when a fresh set-up arrives. That's what I mean by riding the trend and not the trade.

With such a strategy it is, of course, fine to put yourself in a position to get a "bonus" if you can. You might, for example, stick a tight stop in rather than a straight exit when price reaches your "target", or whatever.

jon