How to Manage a Trade

[tombtrader]

This was the DAX today. Long at 699.5. Markey got to 2.3R and then pulled back tp entry price and is currently having another go at the highs. T1 is 7011 which is 3.28R.

Quandry is always to get out @ 2R and miss the move or get out half at 2R and get stopped out on remainder at break even, or to just hold all until T1.

If 1/3 of trades are profitable then I need better than 2R to make money as we all know, so what is the optimal trade management method that has consistency built in to it so that expectancy becomes meaningful?

Having probs adding image that can be seen. Sorry.

[tombtrader]

Finally exited the trade at 7003.5 as there were a number of additional TS3 in both the 3mt and 2mt time frame with their T1 getting lower and lower. Market went a little higher and then pulled back again and is now moving higher. Looks like 7008 is easyly reachable.

[Russell Stagg]

I have this same issue.
My trade plan is to go with the trade and exit at the target unless stf is beyond the strength band - then I can go with my version of the atr stop.
So I have exited at 3.7R - pats on the back all round for a good trade.
2 hours later that same trade is looking at 13R and I am wearing the dunce's hat!

Thoughts or opinions would be most welcome.
I will post my chart but I have the devil's own job getting it to be clear - so if it isn't please let me know!

Or reading it - do I just let it go and see it as part of the frustration of trading?

[Steve Griffiths]

Hi Russ,

yes, this is always the most tricky thing. But at least you made a nice profit.

If you want to look at this with an advanced eye, then you should always go to the larger degree chart. As you can see below, when you look at the 15 minute chart, you can see how this 3minute DP sell was right at the larger degree 15 minute DP resistance, but more importantly where the recent TS 3 long trade was likely to fail. Failure of this TS 3 long then shifted the larger degree 15 minute chart to bearish. Indicating a large degree swing to the downside. With this in mind, you could have looked to run your 3-minute short using the ATR stop.

All of this comes with experience, and knowing how to read multiple timeframes.

Thanks, Steve

[jtrade]

Hi, Russell,

This is one of the biggest questions for most of us. A friend of mine does very well always taking a 1R profit, but he has at least 60% winners (oops, mustn't suggest a high winning % is important). I do this, almost always trading in 3 lots : t1 at 1 or 2R (2R is the target, but I will take 1R if it is a counter-trend trade and hesitating); t2 at a DP, usually 3 - 4R area, t3 with an ATR stop on a higher timeframe.

When to move my stop to breakeven is something with which I still struggle. If the trade is counter-trend, I move to b/e as soon as t1 is hit; otherwise, I wait until either t2 or the ATR stop of the entry timeframe kicks in; I use a proprietary double smoothed stochastic to indicate a trade hold, btw. I grade every trade and beat myself up if I exit a trade aganist this indicator (which I occasionally do nonetheless). I have started getting up one hour earlier at 0600 to spend a quiet hour to myself, to meditate and then contemplate and visualise the trading day ahead, including holding my trades and trading with discipline. I remind myself every morning that trading is a marathon not a sprint and that I can never know the outcome of any trade in advance. I endeavour to transform the pain and frustration of losing and/or imperfect trades into postive, reinforcing energy*.

So much room for improvement...

:)

J.

* I realise that sentence may sound a little weird :o , but I mean that I use negative experience to drive me onwards and hopefully upwards. I do not try to avoid any feelings that arise, but experience them fully (something I learned from Ed Seykota).

[Tony Beckwith]

Hi Russell / jtrade

To add to what both you and Steve G have said on this important issue...

I have been working with Steve on a fixed exit strategy which caters for both trending and sideways markets, similar to the strategy used in the RT trade record several years ago here...

It works like this -
Divide the position into 2, if possible.
For a DP trade (where there is only one automatic target), plan to exit the 1st 1/2 position at that target and, at that time, move the stop on the 2nd 1/2 position from its initial level to break-even (however if the ATRStop is closer than break-even, just use the ATRStop for the 2nd 1/2 position - as is the case here).

Result here: +3.7x profit and +14.6x profit = +9.1x profit - an excellent risk-controlled return.

We are putting the final touches to this strategy for the TS1/2/3/4 set-ups as well and aim to publish it shortly!

Tony.

[jtrade]

Looking forward to seeing it, Tony.

It sounds logical & well thought out.

J.

[Russell Stagg]

Hi Everybody

thanks for all the comments - very useful indeed.
I did compose a longer reply but it seems to have disappeared into the ether.

The meditation is something I have heard before - don't know if it's quite me though.

Multiple time frames - definitely and I am getting a little better at that.

tony - auto exit strategy sounds interesting.

Final thoughts - scaling out is something I do and something I wish I didn't.
Statistically I know it's wrong but psychologically it satisfies a need - my job is to get rid of that need. Onward.

[jtrade]

Final thoughts - scaling out is something I do and something I wish I didn't.
Statistically I know it's wrong but psychologically it satisfies a need - my job is to get rid of that need. Onward.

The life of a trader can at times be gruelling. If scaling out, which almost always greatly increases the winning % (I always feel guilty mentioning win % on this forum :p) helps one to hold part of the position through thick and thin to the occasional huge winner, I'm all for it. For me, it's not about maximising profit, it's about making a good living with the minimum aggravation. I used to love trading, but I was very inconsistent and could not live off what I made. I don't really like trading anymore, but I trade much better.

I used to want to BE a great trader. Now I just view trading as something I do to generate income, which has very little to do with who I am.

[Russell Stagg]

Very thought provoking post jtrader.
I find myself that as I get more profitable - trading is becoming more boring.
Which is not something I expected or planned for.

I do try and increase the win rate ( who doesn't?) which is where I get my vicarious thrills from - the endless searching and coding. so far I have a massive 3% improvement (lol).

Golf however keeps me sane. Now there is a game that I don't think I will ever master.

[Eddo]

Very thought provoking post jtrader.
I find myself that as I get more profitable - trading is becoming more boring.
Which is not something I expected or planned for.

I do try and increase the win rate ( who doesn't?) which is where I get my vicarious thrills from - the endless searching and coding. so far I have a massive 3% improvement (lol).

Golf however keeps me sane. Now there is a game that I don't think I will ever master.

Hi Russ

Purpose built Tom Wishon clubs .......... thats the answer to the golf problem :)

Chris

[Steve Griffiths]

Hi guys,

exactly............. to be a good successful trader is boring, very few people realise this. Because it is all about patience and discipline and risk control, all boring subjects.

Yes, this is the whole point, in the early days, it is probably psychologically better to take partial profits earlier and in this way you feel happier as a trader and therefore psychologically can let the balance of your trade run. So although it probably isn't going to make you the most money, because you can actually trade it yourself, it is actually better for you overall, especially in the early days.

This is what so many people do not realise, trading is more about psychology and how you act yourself rather than just the pure maths of maximising profit. So in this respect, sometimes sacrificing some profit with the aim of being able to actually trade it yourself has a better result for you overall.

Then as you grow as a trader, and yes as it becomes more boring, then you can readjust to start to maximise your profits again.

This is all a very complicated journey that takes many years if not decades to master. This is why I find it so frustrating the way amateur traders expect to become multimillionaires overnight with no work or experience or understanding of what is really required to become a professional trader.

This is where the new hybrid trade managemnet strategy that we are working on at the moment will help many of you because it should start to put a small bit of profit in the bank earlier which psychologically is probably easier for you all to deal with.

Thanks, Steve

[jtrade]

Golf however keeps me sane. Now there is a game that I don't think I will ever master.

Now you're talking, Russell :)

I used to be a member at Goodwood, not so far from you (very fancy there now, what with the Ralph Lauren golf shop - much more basic when I was there, but the views from the top of the Downs are fantastic).

:D

J (stuck at 16 handicap for what seems lke an eternity :( )

PS. Hey, Chris : I've promised myself a new set of irons when I get down to 12... as a result, I'm still playing with my 1998 Big Berthas ;o(((

[skyhoops]

Hi, I am using MTP 6, automatic setups, EOD Forex. If one day I get set ups and place the trades, but then I run the scanner the next day and the trades do not come up again, do I keep them open if filled, or even if not filled? I am using recommended strike price, profit and stop loss.

Thanks.

[Russell Stagg]

Hi Russ

Purpose built Tom Wishon clubs .......... thats the answer to the golf problem :)

Chris


Oh now you are just teasing me!
I too have promised myself a new set when I get to 16 ( currently 21).
Have been on 21 for 3 months now and it's driving me nuts!

[Steve Griffiths]

Oh now you are just teasing me!
I too have promised myself a new set when I get to 16 ( currently 21).
Have been on 21 for 3 months now and it's driving me nuts!

Hi Russ,

Amazing how many traders are also Golfers, all of us here at MTP Play Golf as well ;)

Myself, I splashed out on a new set of Cobras at the start of this year and it was one of the best investments I made. New clubs are so much easier to hit and much more forgiving. I am now a generous 18 (that can sometimes play down to 15/16 on a good day).............. but the new clubs, particularly the new Driver made life a lot easier :)

Steve

[jtrade]

So there'll be an MTP Golf Day next summer !?

Splendid idea even if I say so myself...

:D:D:D

[Russell Stagg]

+1 to that - although I think Steve & the MTP staff are a bit far away from W Sussex. Still, always looking to play new courses.
If you want to come over here - no problems. We have great course(s) all over.

[jtrade]

Pebble Beach gets my vote...

[Eddo]

+1 to that - although I think Steve & the MTP staff are a bit far away from W Sussex. Still, always looking to play new courses.
If you want to come over here - no problems. We have great course(s) all over.

Hi Russell,

I am lucky enough to have a home in the US which is on a golf course - we are on the 9th Tee and I get to see a whole load of interesting swings :) My wife and I will be going over there in a few weeks time for a couple of months or so which gets us away from the British winters and of course my game should get a bit better as well. Its such a difficult thing those to get that handicap down :mad:

[Russell Stagg]

Eddo

You lucky thing! Clearly you are a guy worth knowing ;-)
But don't get me started on bringing handicaps down!
I think we should get back to trades and mtp now or Master Steve will be spanking us.

I made the dumbest error of the year today - I doubled down. I don't know why - anyway you can guess the result. Even as I am placing the order my trader mind is saying " you shouldn't do this you know" ... and still I ignore it.

Sometimes I hate what trading shows you about yourself - there is just no hiding place. This forum board is my confession box. So please someone hear my words and forgive me. Amen. On to the next trade.

[Eddo]

Eddo

You lucky thing! Clearly you are a guy worth knowing ;-)
But don't get me started on bringing handicaps down!
I think we should get back to trades and mtp now or Master Steve will be spanking us.

I made the dumbest error of the year today - I doubled down. I don't know why - anyway you can guess the result. Even as I am placing the order my trader mind is saying " you shouldn't do this you know" ... and still I ignore it.

Sometimes I hate what trading shows you about yourself - there is just no hiding place. This forum board is my confession box. So please someone hear my words and forgive me. Amen. On to the next trade.

Ops , sorry about your double down thing ........... v naughty :eek: Of course I have never done that ;)

I don't know if you take RichBois TTT eBooks Russell but if you don't can I recommend them to you. They provide an absolutely excellent guide for George Taylors 3 day cycle which combined with the fine tuning of MTP, to give you exact setup points might help.

Actually I have been thinking if the TTT method could assist me in playing more Golf and less time infront of my computer (which my wife hates).

My thinking is that (and using the ES/$SPX as an example) because TTT has calculated we have an 80+% chance of getting a Positive 3 Day cycle I could trade on just 2 of the 3 days and use the Sell day as an additional golf day.

How it might work: - well I sit at my computer on the Buy day waiting to make a Long Trade at the Buy Day low. Hopefully I will get a nice MTP Buy Signal at around or near the low of the day and place my Long Trade.

I can now leave the scene and not return until the Sell Short Day (having played a blinding game of golf in the day between!). All I do when I return to my computer on the Sell Short Day is exit my Long Trade, which I took two days earlier, when the combination of the TTT High projections and a nice MTP Short signal come in at the SSD high.

Now if I could get in at the correct Buy Day low and out at the correct Sell Short Day High (thats going to be the hard bit) I know that on the ES/$SPX I have a +80% chance of getting a winning trade with an average 36 point gain - thats ES points not R's.

Now assume I trade on a spreadbet account starting at say £50 per point, thats a £1,800 gain EVERY in three days for 80% of the 3 day cycles. The other 20% of trades would have gone down for only a 1R loss.

Blimey even I could live on that - if you then factor in position sizing the annual returns would be absolutely stonking :p

The result, if I could do that I would only spend 2 out of three days at the computer, my golf would be much better, my wife would not be so cross and I would not give a monkeys about the massive drop in my Pension (401K) fund !

Anyone got any thoughts about this as an idea?

Chris

[Russell Stagg]

We all trade differently - that's what makes markets I guess. One man's profits is another man's pullback...

I did glance at Bois work - but a week's evaluation just isn't enough to make any sensible decision. I actually bought Taylors book about 4 years ago - it has to be the worst written trading book ever. concepts are interesting though.

I understand the wife thing - mine feels the same but feels worse about golf ( wrong wife? ;-) ). I am giving her lessons though and promising that she will only play in hot countries - working so far...