Originally Posted by brownsfan019 »

... there is no correlation between taking all your setups and overtrading.

Really.

So I place a trade early in the session, in accordance with my trade setup. It's a winner, and following my exit strategy, I take profits. In fact, it's so good that I've modestly exceeded my profit target for the WEEK.

But wait, I see yet another setup forming. And it looks valid too! What do I do?

A. You know it's valid, according to your parameters, so you take the setup with your regular position size

B. You follow choice A. but with a reduced position size - after all, why give away your gains

C. You follow choice A. but with a increased position size - after all, you now have more $$$ to risk

D. You've already handsomely exceeded your daily profit target, so why bother - wait until the next trading session tomorrow

E. Do nothing, sit aside and enjoy the $$$ - take the rest of the WEEK off

All thoughts are welcome....

[torero]

If the position sizing has been planned out ahead of time in your trading plan or system, then by all means trade with it. But if you don't take the next trade, it'll skew the results of the performance of the system. This next trade may be the one that will make up for the 4, 5, 6 etc trades that will turn out to be duds. If the system has been tested and proven ahead of time that the positive expectancy is there, why deviate from that? All these parameters have to be in place as part of the system such as trade only a certain amount of time everyday, a maximum number of trades allowed per day. You can even test if a maximum $$$ has been reached each day and stop trading, find out if it does get a positive outcome. All these have to be prepared in the trading plan before so there's no feeling of "now what do I do? Go with my instinct or intuition?" You know how that turns out.

[brownsfan019]

Originally Posted by cooter »

Really.

So I place a trade early in the session, in accordance with my trade setup. It's a winner, and following my exit strategy, I take profits. In fact, it's so good that I've modestly exceeded my profit target for the WEEK.

But wait, I see yet another setup forming. And it looks valid too! What do I do?

A. You know it's valid, according to your parameters, so you take the setup with your regular position size

B. You follow choice A. but with a reduced position size - after all, why give away your gains

C. You follow choice A. but with a increased position size - after all, you now have more $$$ to risk

D. You've already handsomely exceeded your daily profit target, so why bother - wait until the next trading session tomorrow

E. Do nothing, sit aside and enjoy the $$$ - take the rest of the WEEK off

All thoughts are welcome....

If you have a daily or weekly monetary goal in place, you take that. I personally do not like that strategy at all.

Assuming you are not done trading based on a $ goal, then YES you take EVERY single trade that your system produces b/c you have NO IDEA which ones will work. What if you stop after 1 and you later see that 5 more would have produced profitable? You just left a ton of $ on the table.

Again, if you truly believe in your trading system, this should make perfect sense. If the trading system is more or less a 50/50 shot, then I would hesitate as well.

This is my opinion from my personal experience. I think it's good for new traders to look for a $ goal and then quit. But for those of us that have been around for awhile, we realize that you have to strike while the iron is hot. That may mean that one day produces profits for your entire month. It happens. If you bypass those extra trades b/c you were afraid to give back money, it will cost you in the long run.

Maybe others have found that just taking one or two a day and see what happens is best. But, whether you are a trend follower, counter-trend, chop, etc. I believe you must strike and strike hard when the conditions that you are waiting patiently for present themselves b/c there's going to be plenty of times where not much is happening in your trading world.

Along the lines of another thread, we were discussing the common traits between a sales career and trading and this fits right into that. As a sales person you realize that all it takes is ONE sale to make your day/month/year. I don't think you can hit one trade to make your year, but the idea holds - you can hit a handful of trades during the month that make your month. You can hit those all on the same day. So, one day of trading could very well make your month. If you eliminate those big winners simply b/c the first trade of the day made money, you just set yourself back in a large way.

[Anonymous]

B.F.;

There is a very basic flaw in this idea: Not all situations are equal. That is, not all price action is created equal.

In keeping with the blackjack idea, you need to include card counting. Card counting basically says, while there is a "set" way to play each hand, the best play actually needs to take the "count" into it. Simply, while hitting a 12 vs. a dealer's 7 is correct. It is not correct if the count is -5. The -5 means more face cards to bust you and thus one should do the opposite of what basic strategy says. So 95% of the time you may follow basic strategy and hit your 12, there are those times 5% when standing is better.

Card counters can be banned by casinos.

Casinos will gladly teach basic strategy.

Simply, Basic strategy. only gets one to close to a 50/50 proposition. Knowing when to deviate gets one the real edge and puts fear in the hearts of the pit bosses.

Not every moving average cross is created by the same price action or volume or volatility. One's edge comes from being able to discern the differences.

[brownsfan019]

Pivot - my idea here is not clear apparently. The analogy of playing the blackjack hand the same time, every time was to simply say - be consistent in your trading.

The actual breakdown of this being a blackjack analogy is irrelevant in what I was attempting to convey. You can substitute blackjack for rummy, dice, dominos, horseshoes, corn hole, lawn darts, etc.

The point that I tried to convey and fell short was to simply say - you need to 'play' your hands consistently, whether in trading or at the card table. You cannot one hand hit on a 12 and the next hand not hit that same 12 and expect to come out ahead. Odds are, you will lose twice. I understand there's always exceptions to the rule, esp for the pro's, but until you reach that level, consistency is key. And I proved it to myself - I took the high score rather easily by simply applying very, very simple rules. As you know, I am a big fan of keeping things simple. I think there's a lot of unnecessary over-analyzing that goes on when people trade or play cards. It's almost as if we want things to be much harder than they might be...

You've got to know when to hold 'em, know when to fold 'em
Know when to walk way, and know when to run
You never count your money, when you're sitting at the table
'Cause there's plenty time for counting, when the deal is done.

- The Gambler, Kenny Rogers

Professsional traders don't gamble, they speculate when the probabilities are in their favor.

Philosophically, we can get into broad discussions about how life in general is a gamble, etc., etc. but none of that is going to help us become successful traders.

[Reaver]

I am no expert, but by definition, if you are not a discretionary trader, then you should take all setups that come along.

By trading a mechanical system you are in essence forfeiting the factor of discretion in your trading...

However, if I were kicking some major butt at the beginning of the week and had already exceeded my target.....Even though I know I am not technically supposed too....If I for some reason just wanted to relax, I maybe would take the week off...because technically in your business plan you have exceeded your target so you are meeting your expectations....but logically, and by definition, I would also know that I SHOULD take every setup that presents itself, as that by it's very nature is how a system is supposed to work.

The Kenny Rogers song applies only to discretionary traders, IMO...for a system trader-knowing when to hold, fold, cover, go long, or whatever has no bearing......it is all about what the system says to do....