ES frustration today

[keymoo]

Hi guys,

I had a frustrating experience today (Feb 12th 2007) on the ES. Price dropped through yesterday's low and I set up an offer to sell 1 tick below yesterday's low on a pullback. The market condition of the day was a sell off followed by some downward-biased chop. See chart attached time is EST.



My sell order was filled at 1436.75 and my target set at 6 ticks 1435.25 with my stop placed at 1438.25. For the next half an hour we chopped around so I wanted to get out as my prediction had not come true. In the book Phantom of the pits (http://www.futuresmag.com/cms/future...ittle+history), the phantom recommends that you get out of losing trades ASAP. Put a time limit on them and if your position direction is not confirmed then get out. This is what I did for a 1 tick profit to cover commissions.

Now, the most frustrating part is that as soon as I exited my position price moved in my direction and hit my target within 4 minutes. I just needed to vent my frustration.

Should I have left my position as it was and just set it and forget it? Should I try and cut losses short by exiting positoins that don't move my way within 15/30/whatever minutes? Should I always let my stop get hit or exit before? I would appreciate some guidance.

Thanks!
keymoo

[TinGull]

Hey keymoo,

that does hurt I know. The way I look at a trade is...if it was a good trade, and I know that the trade has merit and that's why I put it on, then I'll leave it be. If the stop gets hit and I could have gotten out for less, then so be it. I'm not gonna sweat it out, because I know probabilities are in my favor.

Maybe it's just me, but that's how I do it.

[trader273]

Stops are there for a reason. Cutting a winner short out of fear is detrimental to the long run. The only time I know my trade is wrong is when my stop is hit. I know it sounds so simple, but in the heat of battle it can be hard.

That is why I try to keep in mind that this is a business and businesses have expenses.

[MrPaul]

If you are trading multiple contracts you could scale out half or 2/3 etc.

This allows you to cut your risk while still ensuring the potentiality of your original plan.

I've done that a couple times and been stopped on the last portion, and i've also had a trade run the way my plan was geared towards.

[Anonymous]

	Quote:	trader273
	Stops are there for a reason. Cutting a winner short out of fear is detrimental to the long run. The only time I know my trade is wrong is when my stop is hit. I know it sounds so simple, but in the heat of battle it can be hard. That is why I try to keep in mind that this is a business and businesses have expenses.

I take the opposite view. The view shared by the Phantom of the Pits and many other successful traders.:

When you enter a trade, don't wait for the market to prove you wrong, look for the market to prove you right.

Why sit and wait as price moves against you and hits your stop? If you are on the wrong side, get out. Enter a trade looking for price to prove you correct by moving in your desired direction from the start. If it does not, does price really have to move all the way to your stop loss for you to know you are on the wrong side? Of course not. Place the stop, but get out prior to price hitting it.

Losses are indeed an business expense in trading. But you can strive to cut your losses short. One good way to do that is to not wait to be proved wrong. Remember, trading is a losers game-he who loses best, wins.

[Anna-Maria]

	Quote:	PivotProfiler
	When you enter a trade, don't wait for the market to prove you wrong, look for the market to prove you right. Why sit and wait as price moves against you and hits your stop? If you are on the wrong side, get out. Enter a trade looking for price to prove you correct by moving in your desired direction from the start. If it does not, does price really have to move all the way to your stop loss for you to know you are on the wrong side? Of course not. Place the stop, but get out prior to price hitting it. Losses are indeed an business expense in trading. But you can strive to cut your losses short. One good way to do that is to not wait to be proved wrong. Remember, trading is a losers game-he who loses best, wins.

Can't really argue against that!

Particularly if you're employing a jobbing strat.

[trader273]

	Quote:	PivotProfiler
	I take the opposite view. The view shared by the Phantom of the Pits and many other successful traders.: When you enter a trade, don't wait for the market to prove you wrong, look for the market to prove you right. Why sit and wait as price moves against you and hits your stop? If you are on the wrong side, get out. Enter a trade looking for price to prove you correct by moving in your desired direction from the start. If it does not, does price really have to move all the way to your stop loss for you to know you are on the wrong side? Of course not. Place the stop, but get out prior to price hitting it. Losses are indeed an business expense in trading. But you can strive to cut your losses short. One good way to do that is to not wait to be proved wrong. Remember, trading is a losers game-he who loses best, wins.

I guess it is how you define that your trade is wrong. The OP thought his trade was "Wrong" and got out. Then it went to deliver to his price objective. So in essence, he got out a whole 1 tick, instead of what he should have gotten if he let the trade be. So, if trading is an odds game, which it is, the OP just reduced his odds of making money since this was a "winner" ( it delivered the price objective w/o the stop being hit) the next one or two trades could be losers, but since he cut his winner short to 1 tick he will be down instead of up or breakeven.

True cutting loses short is good. But it seems that if a trade doesn't instantly go your way you get out. That might work for you, but not for me.

I think of it as a restaurant analogy. Say you run one of the best steakhouses around. You get a huge delivery of steaks ( t-bones, porterhouse,etc). You know you must sell them all before they go bad in a week. So on monday you go to look at the reservations for the the weekend and you see you have very little. You get scared that all those expensive steaks you just bought are going to spoil and you have a loss. So you call the other local steakhouse and sell them the steaks for a marginal gain to you. You feel better because you know you wont have a loss. But when the weekend comes around you find your restaurant packed. However, you don't have any steaks to sell these customers. So the money you could have and should have made, is much more then you got. So in the end you would have been better to risk the steaks spoiling rather then sell them early for a small profit.

[brownsfan019]

	Quote:	TinGull
	Hey keymoo, that does hurt I know. The way I look at a trade is...if it was a good trade, and I know that the trade has merit and that's why I put it on, then I'll leave it be. If the stop gets hit and I could have gotten out for less, then so be it. I'm not gonna sweat it out, because I know probabilities are in my favor. Maybe it's just me, but that's how I do it.

I agree with Tin and 273 here.

What it comes down to is knowing your system's strengths and weaknesses. Either you KNOW that trades can take a while to develop or you KNOW that they have to get into profit quickly. Noone here can tell you what is best for YOU and YOUR system. You HAVE to prove to yourself what is best. Just looking at this one trade, it appears that this was a great trade. I don't see any problems - your stop was never in danger and your profit target was hit. That's an ideal setup for me. Others want profit and profit instantly.

Here's an example from right now - I took at an EC short at 8:45am EST today. At 9:02am the profit target was taken out. Just reading that, it appears to be a nice, good trade. However, here is what happened - at 8:48 and 8:49 I took a little heat. Now, when it came back down again I could have paniced and said just get a tick or two and move on. Had I done that, I would be sitting here, just as the OP, asking why did I get out? My stop was never in danger and this is a 'winner'.

Bottom line - if you turn your 'winners' into a few ticks gain and take full stops, you'll never make money.

[TinGull]

Yes, Brown. And...if you're basing your system of probabilities and have a probabilistic frame of mind, by taking all the setups you see, but knocking out ones early that you *think* may turn into losers but go on to win...will seriously knock your strategy. For a strategy to be sound you have to be willing to take the trades it shows you and take the losses when they come. Sticking to a plan is very very important to me.

[keymoo]

Thanks for the comments guys, some great thought there. I guess I just need to test it. I don't mind taking a bit of heat, no problem if it happens right away. But waiting 30-40 mins with price sitting there doing nothing is not exactly a great momentum trade. If price had gone up I would have been saying to myself, great trade you got out with 1 tick profit instead of stop loss getting hit.

Thanks for the comments.