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I don't believe there is a one-size-fits-all answer to your question Rich.
I've been daytrading the indexes for quite awhile and employ both the
approaches you mentioned. Which one I use is dependent on what kind of
market we have that day/time along with the criteria I use to manage a
trade. Some days the market comes to play and other days it comes to churn
inside a range like we saw all of last week, so I just try and adjust to
what it is doing (or not doing). I'm not always right, but if I choose the
wrong approach for a particular trade I can normally find a way to get back
in if necessary, so I really don't worry about it.
You didn't mention trade size or any other criteria for exiting a trade so
it's hard to give you any specific ideas. There was an earlier post about
trading a 3-lot which I agree with 100% but not because of the number 3 -
more to do with the fact that it isn't a 1-lot. Trading multiples gives you
a lot of flexibility and makes the decision making easier. Also consider
adding to a trade to either build or maintain your original position.
What's wrong with exiting part/all of your position at an S/R level and then
watch and see if the market can hold the S/R level it just broke. If it
does and forms a bull/bear flag for example, why not add the ones back in
you took out earlier or get back in if you went flat?
The other thing I would highly recommend is to ignore your P&L during the
day. I know this is going to be a controversial suggestion, but IMHO what
happened on the last trade(s) is completely irrelevant to what the market is
doing now, and you can't manage the current trade based upon what occurred
on previous ones. What will happen is that if you're down on the day you'll
be too quick to take profits in order to get "even", or you'll get cute with
the Stop to try and reduce the risk of losing even more which will usually
only result in turning a winner into a loser.
Or if you're up on the day you'll be too afraid to give it back and may not
take a trade which of course turns out to be a big winner. Maybe these
scenarios have only happened to me...hehe, but in my experience focusing on
the bottom line only results in bad decisions. Instead keep your focus on
the market and "Stay in the now" as Billy Jean King says, forget what
happened before, and concentrate on executing your trading plan on each
opportunity that presents itself. And if you don't like the market or
aren't in the proper frame of mind to trade, then don't. It will always be
there later.
I used to struggle with this a lot and worry about missing moves, getting
out too soon etc., but the vast majority of the time the market will provide
an opportunity to get in or get back in if you know what to look for. And
after being wrong so many times you begin to understand that this is going
to be the case as long as you trade, so you just accept it and find a way to
deal with it. For me that means if it sets up long you buy it and if it
sets up short you sell it. Then do the best you can at managing each trade
and save the chip counting for checkout time.
If you get out too soon and can't back in, so be it. If you miss a move, so
be it. There will always be another one which will once again allow you to
be wrong on your exits (for me that's about every trade). The good part is
that none of this prevents you from being a successful trader....unless you
let it.
Hope this helps,
Bob
----- Original Message -----
From: "Rich Tuchow" <rtuchow@xxxxxxxxxxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Saturday, November 17, 2001 9:34 AM
Subject: Profit Taking
> I am an S&P day trader and keep going back and forth in my mind my exit
> strategy. There are 2 schools of thought 1)let profits run 2)don't try to
> be a pig on every trade. It seems that every time I grab the 3-5 point
> profit the trade goes on to 10-15 points and every time I let profits run,
> the 3-5 point profit disappears. I am not particularly found of trailing
> stops because you have to be willing to give back a fair amount of profit.
> Others use a staggered exit strategy such as take 1 contract off at 3
points
> another at 5 another at 8 etc.
>
> I would be interested in hearing only from successful S&P day traders
which
> school of thought they follow.
>
> Thanks
>
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