[DugDug]

This thread is ideally about discussing good/interesting/profitable ways of being able to manage and combine strategies.

This is both in the respect of asking the questions
- how to manage and combine various strategies
- how to manage and combine long term trades and short term trades
- how to manage taking profits v letting them run.

While I dont wish to get into arguments about what works, whats best, etc; etc;
So ....I would like to start off with a few assumptions with which to begin a discussion.

Assumptions.
1...Trading with the trend works - is easier, less stressful, less timing is involved.
2...The big money is made in the big moves with fewer trades.
3...Psychologically tricking ourselves is actually very important - more so than discipline
4...Discipline is important in that you have to follow what ever plan you devise
5...While a lot of ideas can be backtested, context is important, as is flexibility, hence a lot of discretionary trades, whilst having a basis that can be somewhat tested, are not binary, and hence very flexible as to what works and when to apply it - in other words dont take anything too literally if you cant profitably test it as human input is vital in trading.

.........................
It has dogged me for all the years I have been trading that there is always a conflict between letting trades run, and taking profits. Mainly because, we are all told to let things run. That is were the money is made.... however its really difficult, as we always prefer to capture short term gratification
We think that - by taking lots of little profits that the market offers, we can capture more PL.
Example: a currency may move 15-20% over the course of the year, yet it move 1% a day (possible 255% a year). We extrapolate to think well if we can capture even only 1/3 of that we will still make 80%

- We also think that the less time you spend actually exposed to the market the less risk that you have. Hence the desire to get the timing right so we make quick money and then exit waiting for the next opportunity.
Problem is with this the maths. Let’s say your chances of being right are 50% (50:50) if you buy something and get it right, then sell it taking profits, looking to buy it again on a pullback etc; Are you not actually increasing your risk?
I always thought the probability was that getting it right, AND getting it right AND getting it right was along the lines of 50%*50%*50%.... etc; which means that ultimately you actually made it harder foryour self to get it right over the long term.
(now I know this varies, and this is possibly nonsensical …. Just go with the flow for now)

Yet buy and hold also does not necessarily work either – that’s why we want to try and beat the market with ideas etc and develop trading styles, strategies and plans to better the odds in our favour.

We also know that doing the same thing over and over again is boring – even if it works, and that psychologically trading is difficult. Basically our brains are not really built for it (read Your money and your brain by Zweig plus other books)

So how do we combine – trading less, trading with the trend to capture the big moves, and yet still manage to satisfy our needs? One of the ways seems to be in combining systems and strategies, and being able to take profits, as well as running trades.

This becomes then a question of …. Is it not then one big system?

Eg; you short 3 contracts, buy one at a level that allows you to cover your costs, buy one at a level that allows you to move the stop for the remaining contract to Break even and then run the last contract.
The argument is that its one system – why not just sell three contracts and let them ride. OR
Is it three different systems – one for each contract.

Lets just assume for simplicity sake that they are just one system, and that this system is designed to help make it psychologically easier for the trader to follow, by satisfying their base desires, and also allowing them to run it.

So to the crux of the discussion.

Do other traders have thoughts on how best to do this?
What do they do in practice?
What do they find hard and or easy about each aspect of it?
How can they trick themselves if need be?

[DugDug]

As a few thoughts to kick me off.

Do other traders have thoughts on how best to do this?
This has always been a conflict for me, and so I use a rule of thumb for most trades. I trade off patterns, using a combination of discretion, and signals around context - I have tried to formalise it, but cant seem to mange it sufficiently to be able to put it down as a set of rules.....hence I guess this thread and other forums. I also trade longer term than most day traders.... while i trade daily and may only hold positions for a few minutes to hours, I also may hold positions for months.
I combine strategies - of shorts and longs on different time frames.... so I can be short 5 units whilst at the same time being long 2 units,in the same instrument.....thankyou excel.

What do they do in practice?
I pyramid into winners, and if I need or feel like taking profits at a level I either had in mind, or the market changes shape, I will exit. If I exit on a gut feel but know I should be running profits, I use a rule of thumb of taking off two thirds and letting the third run.
I know that you never know when the big one will come, so you always need to at least give yourself the opportunity.... as they say even if the odds are against you, you will never win the lottery if you dont buy a ticket.

What do they find hard and or easy about each aspect of it?
The fear of missing a trade means there is the conflict, the fear of letting a profit turn into a loss is probably the hardest aspect. However I keep reminding myself - remember what works, remember what you are trying to capture.
The easy part is taking losses..... just cut them and move on. After a while they are forgotten and treated like a small cost.
Its hard knowing that most trades will be scratch to loosers - I tend to make most of the money out a small number of trades. you always feel that surely I can improve this.
annoyingly so, a lot of the times I manage to get the general direction right, but lack of patience hurts me.... a problem I currently have.

How can they trick themselves if need be?
I dont look at a daily PL - I try and avoid thinking in dollars and sense - rather I think in points/pips.
I am trying to develop a system of levels, so that I dont even have to think about noise in the market..... not successfully yet..... as I still actually like to be closely involved day trading, and I am a computer ning nong.
I do take partial profits to make myself feel better.
I am completely flexible in that I will happily reverse a trade and go from long to short.
I am very tempted to give my levels to someone else to monitor and watch - they can call me,...... but where is the fun in that. plus you then have to trust them, and be bothered by them...

[DugDug]

This was all started from another thread....discussing taking profits and pyramiding
One of the quotes were from making a point of employing a strategy of
" trade 3 units, sell 1 to cover costs, sell 1 at a take profit, run the last unit.
Keep pyramiding, so that by the end of a large run, you may have accumulated quite a large position with the trend."
the response being.....

"I've thought about this a lot for a while now but ended up thinking that the concept is in conflict. I mean if one is going to be scaling out quick and fairly quick (exits 1&2), but then later on adding to the winner (the pyramid part) - the whole thing seems in conflict to me. One is adding to the trade when the risks for continuation are diminishing. At least that is how I decided upon it"

This is another area of conflict - apart from others mentioned.
a) The fear of selling at the bottom, or buying at the top.
Which is why I try to use context, and ask ? can this continue... is it likely to continue? if it does where could it get to? ie; what's the risk reward? Can I possibly get into this trade at a better level?

In reality I usually just do the trade, and if it goes my way I let it ride.

b) Are the risks of it continuing REALLY diminishing? Or is it the longer the trend lasts the higher the probability of it continuing?
Again this is a context and time frame issue. If you are entering a daily trend using 5 min charts, then yes the trend will probably continue in the daily trend. If you are counter trend trading, then you are probably asking for trouble.
Also you really do have to ideally try and pyramid early and fast for the best results.
Longer term trend traders will say, and prove via their methods - that the trend is likely to continue, however, there are a lot of them that also have limits/rules to ensure they dont enter trends after the horse has bolted.
How many times have we looked back and gone doh, an example I had of some friends in Australia.... a stock called Paladin - uranium miner. code PDN. They were all patting themselves on the back for buying at 3cents, some sold at 10 cents, a few at 20c.... one even hung on until 50c.... the stock went to $11.00 or something.

Thats why I think the combination of the two styles works. capture short term volatility and also put some in the bottom draw.
Again what ever works for you as an individual.... as the point of this thread is to get other ideas, tricks and tips, or help people think about things.

[DugDug]

Also from the same above idea.....
a quote from another trader
"In my work I now seek two different types of setup (context factors + trigger + post trigger entry + stop and profit capture). One is "get into trends on the timeframe reasonably early and then hang on for the big one." The other is "find the high probability of an xx move for a yy stop" situation and take a quick high probability buck.

They are very different.

One thing to think about in the first category is a high probability non-trend liquidation point where you can take half off to create a free trade for the long run rider. Thales clearly does this effectively although hes to fast to be+ for my liking if he was going for really long holds. At ff this is advocated for some systems where the NTL has an expectancy of under one --- but I suspect the real positive for it is that it gives the holder that "free ride" feeling that lets them hold a position long enough for the few really big pay offs.

Also, if you get at all mixed up about what you are doing you are likely to join the 95%."

I think the key here is the last sentence...... How do you not mix them up? Are you deliberately going to cause problems when trying to do so? (I would suggest yes - as its hard to say I'm bullish and long, yet bearish and short - kind of like here is some bacon and egg flavoured ice cream - great experience but mainly as your mind is being played with.) I also think that it is precisely these types of conflicts that cause many traders to fail....ie; the 95%

To separate the two ideally a broker that gives separate accounts, that allows you to either have two accounts. or allows you to take from one and place the orders that you are running into another.
Tough to resist temptation. Its like saying here is the cookie jar, I am going to place it in front of you, its clear, the lid comes off easily.... now dont eat the cookie.
I have opened a separate account at another broker entirely. Here I place the slow burning trades, whilst I day trade elsewhere. I open the second account systems to amend orders once a day - THEN I CLOSE IT. It seems to work.... how ever its tough mentally you keep thinking, but what if, dam it, could of....
then I use Excel to manage the overall portfolio (if you like)

[DugDug]

perfect example -
sold on a 5 min chart as part of a plan to pre-empt a larger move in the daily charts.
It initially went my way, would have been a good intraday trade.
However it reversed and stopped out.
Should I have taken part profits?

[Marko23]

Originally Posted by DugDug »

perfect example -
sold on a 5 min chart as part of a plan to pre-empt a larger move in the daily charts.
It initially went my way, would have been a good intraday trade.
However it reversed and stopped out.
Should I have taken part profits?

Could you please show a larger chart. This is only a thumbnail.

[Grey1]

Originally Posted by DugDug »

This thread is ideally about discussing good/interesting/profitable ways of being able to manage and combine strategies.

This is both in the respect of asking the questions
- how to manage and combine various strategies
- how to manage and combine long term trades and short term trades
- how to manage taking profits v letting them run.

While I dont wish to get into arguments about what works, whats best, etc; etc;
So ....I would like to start off with a few assumptions with which to begin a discussion.

Assumptions.
1...Trading with the trend works - is easier, less stressful, less timing is involved.
2...The big money is made in the big moves with fewer trades.
3...Psychologically tricking ourselves is actually very important - more so than discipline
4...Discipline is important in that you have to follow what ever plan you devise
5...While a lot of ideas can be backtested, context is important, as is flexibility, hence a lot of discretionary trades, whilst having a basis that can be somewhat tested, are not binary, and hence very flexible as to what works and when to apply it - in other words dont take anything too literally if you cant profitably test it as human input is vital in trading.

.........................
It has dogged me for all the years I have been trading that there is always a conflict between letting trades run, and taking profits. Mainly because, we are all told to let things run. That is were the money is made.... however its really difficult, as we always prefer to capture short term gratification
We think that - by taking lots of little profits that the market offers, we can capture more PL.
Example: a currency may move 15-20% over the course of the year, yet it move 1% a day (possible 255% a year). We extrapolate to think well if we can capture even only 1/3 of that we will still make 80%

- We also think that the less time you spend actually exposed to the market the less risk that you have. Hence the desire to get the timing right so we make quick money and then exit waiting for the next opportunity.
Problem is with this the maths. Let’s say your chances of being right are 50% (50:50) if you buy something and get it right, then sell it taking profits, looking to buy it again on a pullback etc; Are you not actually increasing your risk?
I always thought the probability was that getting it right, AND getting it right AND getting it right was along the lines of 50%*50%*50%.... etc; which means that ultimately you actually made it harder foryour self to get it right over the long term.
(now I know this varies, and this is possibly nonsensical …. Just go with the flow for now)

Yet buy and hold also does not necessarily work either – that’s why we want to try and beat the market with ideas etc and develop trading styles, strategies and plans to better the odds in our favour.

We also know that doing the same thing over and over again is boring – even if it works, and that psychologically trading is difficult. Basically our brains are not really built for it (read Your money and your brain by Zweig plus other books)

So how do we combine – trading less, trading with the trend to capture the big moves, and yet still manage to satisfy our needs? One of the ways seems to be in combining systems and strategies, and being able to take profits, as well as running trades.

This becomes then a question of …. Is it not then one big system?

Eg; you short 3 contracts, buy one at a level that allows you to cover your costs, buy one at a level that allows you to move the stop for the remaining contract to Break even and then run the last contract.
The argument is that its one system – why not just sell three contracts and let them ride. OR
Is it three different systems – one for each contract.

Lets just assume for simplicity sake that they are just one system, and that this system is designed to help make it psychologically easier for the trader to follow, by satisfying their base desires, and also allowing them to run it.

So to the crux of the discussion.

Do other traders have thoughts on how best to do this?
What do they do in practice?
What do they find hard and or easy about each aspect of it?
How can they trick themselves if need be?

Market is a counter initiative mechanism and human use their initiative to trade it,, Through out your life you have been told to use your intuitive to do things right way and suddenly you are facing a mechanism that punishes you for using your initiative,,, strange hey ,,

what is the solution ?

open a position lets say with 3 contracts close 2 contracts as soon as you have moved 0.5 unit of volatility in your favour with stop to break even point and walk away and I mean away from the PC for the rest of the day ,,, your position does not need your round a clock analysis and all it needs is to walk away and let your position run and run ,,
I totally understand this is not a very clever strategy but it works best with those who are loaded with millions of confused strategies and their initiative works against them by finding an excuse to close a perfectly sound trade instead of letting it to run and run ,,

I also like to add a note on stop loss.. instead of continuously thinking where to stop loss I think you must spend more time on TREND identification and not where to put that stop,, The trick in stop loss is not to stop at this or that level,, the trick is to reduce your position size and have a wider stop based on the instruments volatility and instead let the profit run ,, this is the back bone of risk analysis and traders should concentrate on putting less pressure on their CAPITAL than having a larger pos size and tighter stop loss.

Grey1

[DugDug]

sorry - previous example chart uploaded.