Trouble Holding On To A Position?

[Soultrader]

Trouble Holding On To A Position?

All traders are guilty of exiting a winning position too quick. We fear the loss of paper profits or perhaps we trade our P&L instead of our charts.

Whatever the reason, holding on to a position requires discpline and most of all a set target in mind. Many new traders tend to exit a winning position too quick just to re-enter and end up chasing the markets. How can one prevent this?

Couple of interesting questions pop up in my mind. As intraday traders its good to have daily, weekly, and monthly goals. Are you capable of managing a position throughout the entire day? Do you prefer to set specific goals on a intraday basis? Some traders would rather take 2-3 ES pts then stick around until the close to manage a position. What does your personality tell you?

Scaling Out

Scaling out is a method I use to help me control my greed and fear. With defined exit targets for portions of my position, I am able to hold on to the last quarter position. For example, if a trader is trading 2 contracts, his first exit target should be 10-15 YM pts. Once this is hit he can then bring his stop to break even and try to ride with the remaining contract.

Thus scaling out helps manage a trade psychologically.

Understanding What "They" Are Doing

Its the big traders that really move the markets. So what are they watching at? Big traders and floor traders who make up most of the volume watch for key price levels. Its fascinating to see the markets travel from one pivot to the next. This is how the markets behave.

New traders need to hold a stronger belief in their methods. If price breaks a pivot and the previous days low is 20 YM points below it, expect "them" to bring it down to this level. The markets like to test key levels to see if there are buyers or sellers at these levels. If not, "they" will take it down to the next line of pivot.

In the chart below, notice the break of price from the value low pivot. Where can you expect prices to travel next? Answer: the previous days low. This is typical market behavior. Always know where your next line of S&R and this will help you hold onto a winning position.



The markets don't just reverse at random price levels. They will test key levels. Afterall, we are not trading the markets. We are trading other traders. At what levels are the big players looking at?

[Soultrader]

Thats definitely on my list of things to do.

[Reaver]

Looking forward to it brother. I'll be at the top of the pre-order list.

[namstrader]

I will preorder 10 copies. 1 for each room. Lots of wisdom and humility from ya Soul, and I really appreciate your site.

[keymoo]

I'll pre-order your book, for sure.

[Jakew]

Excellent article from start to finish!

Scaling out as a psychological tool, and not just a purely technical/mathematical device - very insightful.

[wow]

I've learned from a trader in othernet IRC chat room by using projection of 3X to 5X versus Risk as an exit point, followed by trail stop. Works pretty fantastic.

[brownsfan019]

	Quote:	wow
	I've learned from a trader in othernet IRC chat room by using projection of 3X to 5X versus Risk as an exit point, followed by trail stop. Works pretty fantastic.

Feel free to share wow - we've had plenty of threads around here on exit strategies.

[ajhunter]

Glad to see the article. It's coming at the right time as I definitely have trouble holding on to a position. My entries are quite good, I just never believe price will extend as far as it does. Dedicated all of September to working on my exits.

Love the site. Has definitely improved my trading.

[Soultrader]

	Quote:	ajhunter
	Glad to see the article. It's coming at the right time as I definitely have trouble holding on to a position. My entries are quite good, I just never believe price will extend as far as it does. Dedicated all of September to working on my exits. Love the site. Has definitely improved my trading.

If trading in multiple lots, scaling out will help you stay on a trend. For me scaling out helps psychologically and have been able to capture good amounts of an intraday trend.