PitBull said:
Timsk
I wonder if you could clarify why you would scramble for cover when your'e in a profitable trade, you've trailed your stop, but with enough room to not get stopped out. Would it be fear of losing those profits?
Just curious of your thought process in a great trade like this one.
Many thanks
Hi PitBull,
Very well done on your trading - not just today - but since you've actively posted on this board. Very encouraging for the rest of us!
Now, to answer your question, Suppose you're in a trade - any trade - and it's going very much in your favour. You're well up and very happy. That said, you're a pro (hey - we're talking about Richard here after all
) so your emotions are in check. Trading at a profit or trading at a loss does not impact your emotions greatly - either way. That said, Richard's attention must have been very, very focused indeed when his short position seemingly hit rock bottom and buyers appeared in their droves and forced the price back up from whence it had just come within the space of a minute. If Richard had a trailing stop placed as a pending market order, it must have been quite a long way from the actual price action at any one time. I don't know, but I suspect that his stops are 'mental', rather than 'actual' pending orders placed on his trading platform. I would stress that this is just a guess on my part and is not based on anything Richard has said. Certainly, if this is his practice, it is not one that he would recommend to anyone other than a very experienced and profitable market practitioner. So, I suspect he had a mental trailing stop that he would exercise in an instant when his 'micro analysis' told him that the fundamental (sorry for swearing) balance between sellers and buyers had shifted in favour of the latter. This is what interests me and prompted my initial question. The price retraced over a dollar against his position, yet he did not cover. Why? Most traders, I suspect, would have covered for a good profit and, as you say, for fear of giving back their profits which, as most of us know, is the most bitter pill of all to swallow. To conclude, Mr. C' either got lucky - VERY lucky - or his assessment of market sentiment told him that the rally from buyers would be a relatively short lived affair (no pun intended) and that the sellers would prevail and dominate proceedings for a while to come. Whatever his reasoning, clearly he was right and he finally covered his position for a much greater profit than he might otherwise have done.
The point of all of this is to do with exit strategy which, I humbly submit, is the hardest part of trading. Most traders, especially newbies focus on the entry. This isn't the important bit. The very best traders - of which Richard is one, know exactly when to get out and do so without any hesitation, regardless of whether the trade is profitable or not. A bit of a garbled post - but I hope it is clear nonetheless?
Tim.