The most difficult moment after entering a trade!

[wwchen]

let's do a mind experiment, as a trader we should have plans and we should consider all the possible situations before entering a trade, right?

Start:

entering a long trade at price X

assuming risk/reward is 1/2, that is, 10pt stop loss, 20pt take profit...

1) The market goes in your direction and take profit at X+20
2) The market goes in your opposite direction and take the loss at X-10

The above 2 situations are the most easiest to handle, just accept the profit / loss...

3) The market is now X+9, you are happy and waiting to take profit, however, price starts to fall and now it is X-4, now what? what should we do?

you watch the profit goes to loss, should we take the loss at X-4?

I think this is the most difficult situation for a trade to face, I would like to ask traders here in this forum how to handle this (technically or mentally)!

Maybe trailing stops can be used, when the price is at X+9, you put the SL to X+2, hence avoiding a loss, but I think that trailing stops will ruin your plans with R/R = 1/2, because now you take profit with 2pt, the R/R dramatically decreases...

what is your opinion?

Thanks!

 

[Rossini]

If you have a plan to consider all the possible situations before entering a trade you would know what you are going to do if the market moves up down or sideways (regardless of being in profit or loss)...


If you have a Target and a SL then at some point one will be hit. What you are taking about is trade management. Maybe play around with a time based exit approach to help you deal with the situation you outlined in your post?

 

[Chartsy]

why would you set 1/2 risk reward, and not take it?
price is volatile - your range is arbitrary

 

[Chartsy]

i think the hardest part is +19 and it stalls

 

[meanreversion]

Use trailing stops and the above scenario will never be an issue. Backtest this method, and you'll find that sometimes a profit target would have worked better, but other times the trailer keeps you in a move for a long time, and you make some nice coin.

But don't take my word for it, code it up and test it for various markets.

 

[shadowninja]

Only you can know the answer by testing it for your reason for entry. And just when you have arrived at a conclusion, the market conditions change.

 

[spy74]

I still struggle with that one too, trade management is one of the more difficult aspects of trading I've come up against. And I get the feeling its quite a key factor in going from being a break even/small profit trader, to being able to make some decent returns.

However, In the example you've described, @ +9, I probably would let it run and do nothing - i think 1/1 is quite possibly the bare minimum for survival. However, @ +10 I would tend to take half off (i.e at 1/1) taking the downside out of the trade completely. Then just run the balance. For me at my stage, watching a position go from >+10 to being stopped out would possibly throw me off my game and put me in a more dangerous mind-space to trade again.

 

[superST]

This is why IMO targets should be set on market conditions as opposed to a risk 2 ticks for 3 ticks rule or the like.

 

[Hilarymannah]

Mostly if the market is going to reverse on you, it will at a defined price e.g,..recent,medium, long term high/low, pivot, news release, etc,... the price usually moves at increments of an average 10 pips up and down,. (unless it's just noise).
So, as someone has stated, the annoying trade, is when it hits 19 on a 20 pip take,....and reverses for no apparent reason! Don't panic though,.let it hit approx' +5 and it should retrace, so there's no need to loose the full 19,... comes with experience, look for the signs,..they're every where ,..WAAHAHAHAH : )

 

[Hilarymannah]

I'm talking GBP/USD ,..BTW

 

[kwickwool]

These sort of posts show clearly how some people keep looking for a specific istructions or set ups to follow a nice easy rule, surely the way the market reacted and having a feel for where you want to go next and what to do here is key, expecting to work to exact rules is ridiculous. Continous assessment to what the market is doing is key here, not some hard and fast rule, feel the markets, use the force lol

 

[Chartsy]

yep , all about the context...though i just wait till it's easy and fits MY rules rather than applying the management styles in all market conditions; i use trailing stops but only in aggressive trends, so i wait for that to occur

 

[wackypete2]

I took 1/2 @ +9, hedged the other half by opening an opposite position, waited for it to fall back to original open price, x, took profit on hedge,waited, at x-9 I panicked and doubled position moving stop to x-30, at x-20 asked a friend for advice, took friends advice and went all-in since he said it couldn't go lower....

Today, I work at McDonalds.

Peter

 

[trader_dante]

Very few people seem to pay attention to the R during a trade because they are so obsessed with the R at the outset. To be fair, I didn't even think of this concept until many years in but now I use it in almost all my trading.

When you took the trade you had a potential R of 2. This is good.

When the trade is at X+9 your R is now 0.57. This is not so good.

But regardless of this, as someone else said: if you don't know what to do in this situation, you don't have a plan. Without a plan, you're not going to be getting anywhere fast.

 

[Jason101]

How about incorporating time out stops into your plan.

Or you could have multiple targets.

If you had three lots and two targets for example you could exit two at half the target rate of the remaining position. So you have held your trade at break even while not moving your stop reducing the chance getting whipsawed.

 

[Jason101]

Or simply just trust your ability to read the market as to where the next resistance area is.

 

[Jason101]

Or do what I just did and write some rubbish on a thread (or anything else to distract you, something sexual can work) and when you return your trade has gone back into profit. A bit like going to the wc while waiting for your food at a restaurant.

 

[Chartsy]

i've been considering a swing-stock trading exit on this kind of thing; though involves averaging down, for example i buy at support, price falls 1%, reduce target by 10%, 2% 20% so on