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Ira,
Thanks for sharing, particularly your exit strategy in a lower time frames
(which would be entry points in the opposite direction). Although I have
frequently used lower time frames as a clue to what could go wrong with a
trade, I have not "always" adjusted my the stops to them as you suggest.
Your comments reinforce what I need to do "all the time".
don ewers
----- Original Message -----
From: "Ira Tunik" <irat@xxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Sunday, November 18, 2001 6:58 PM
Subject: Re: [RT] Re: Profit Taking
> There has been a lot of discussion on profit taking and the limiting of
losses.
> To limit loses you establish your money management system and it tells you
the
> amount that you can risk. Whether it be 2% or 5% or some other percentage
of
> your account size, the amount is established. After this is done you
select
> what you want to trade. What provides the volatility and liquidity needed
to
> enter and exit without extreme slippage or floor control of the item.
After
> that is done you select the time frame that you will trade based upon your
money
> management system. This is not a percentage stop, a money stop, but a
stop that
> is created by price action and tells you that you have made a mistake.
>
> A system should give you specific entry prices, stops and price
objectives. If
> you are a disciplined trader you will exit the trade at the price
objective and
> look for the next move. If this move is part of a larger move and you
wish to
> stay in the trade and maximize the profit then establish what it would
take to
> give you an entry in the opposite direction. If I am trading a time frame
to
> enter a trade and use the next larger time to continue the trade, I would
go to
> the next time below the one I am trading to look for the Entry Price in
the
> opposite direction. This would be my stop under those conditions. You
don't
> want a dollar stop, a percentage stop you want price to tell you it is all
> over. The one minute chart will turn before the 5 and the 5 before the 15
etc.
> . If you are trading technically, then both entry and exit should be
based upon
> the same premise so that there is continuity in the system.
>
> The system that I use gives a Entry price and 3 Price objectives. If I am
> trading multiple contracts or round lots in stock I can liquidate 50% of
my
> position at the first Price Objective and raise my stop to the Entry Price
and
> then liquidate 25% at the second Price Objective and the last 25% at the
final
> Price Objective. If I am in a trade and there are higher price objectives
on
> longer time frames and I decide to stay in the trade and just raise my
stops, I
> drop down a time frame and look for an entry price in the opposite
direction.
> These different trading entry and exit techniques are based upon
volatility and
> probability of reaching each of the Price Objectives and not a random
number. .
>
> Before entering a trade you should have a plan of action. If this happens
I do
> that and if that happens I will do this. You should have as many
contingency
> plans as there are possibilities. Hope that all had a good week end.
Ira.
> James Alvis wrote:
>
> > It may be well to consider that, particularly on "trend days" which
often
> > provide greater opportunities to "let your profits run", some of the
> > strongest moves occur when larger (other) time frame players enter the
> > market during the second half of the day, adding volume and momentum. A
day
> > trader who walks away from such days after a small early profit could be
> > unnecessarily limiting their overall potential gains.
> >
> > Regards,
> > Jim Alvis
> >
> > ----- Original Message -----
> > From: "Howard Hopkins" <hehohop@xxxxxxxxxxx>
> > To: <realtraders@xxxxxxxxxxxxxxx>
> > Sent: Sunday, November 18, 2001 11:51 AM
> > Subject: Re: [RT] Re: Profit Taking
> >
> > > Hey Brian,
> > >
> > > Though the taxi driver example sounds like a good reason to trade all
day
> > it
> > > is not applicable to trading for the following reasons:
> > >
> > > 1) Once the taxi drivers make $200 do they stand a chance of having
to
> > > return part of that $200 (besides gas costs) if they don't generate
any
> > > additional fares or have a couple bad fares (unhappy riders)? The
answer
> > is
> > > no. In trading you can give back your profit of $200 AND go debit!
The
> > > taxi driver example doesn't take that into consideration.
> > >
> > > 2) Though I've never driven a cab I have run retail businesses where
you
> > > are deciding how many hours to put in to maximize revenues/profits.
You
> > can
> > > stay on the job longer as a taxi driver without losing money due to
loss
> > of
> > > focus or fatigue. Loss of focus and fatigue are destroyers of a
trader.
> > >
> > > 3) The taxi driver example is focused on maximum profit/revenue
without
> > > regard to what satisfies the desires of the taxi driver. If he is
happy
> > > with his $125 he will probably be a better taxi driver. If he's
happier
> > and
> > > nicer to riders he will probably get better tips and reach his goal
that
> > > much faster. Plus don't forget an important thing, if he does his job
> > well
> > > and riders reinforce the fact by giving better tips AND verbal
> > appreciation
> > > he will probably take pride in what he's doing and feel good about
> > himself.
> > > Why is this important for a trader to understand? Because I've been
there
> > > many times mentally beating myself up for quitting too early and
missing
> > > opportunities, staying around too long making mistakes and losing
money,
> > > etc.. If you set a daily goal and reach it then you've done your job
> > well.
> > > You can feel good about your trading and yourself and THIS is what
the
> > > ultimate goal should be.
> > >
> > > 4) This then leads to the real question we all must answer... What is
our
> > > goal??? I've struggled with this in the past and am still struggling
> > with
> > > it. I daytrade the S&P's and puke trades too quickly. The way that
I've
> > > tried to overcome that is with exit rules (which I am still trying to
> > > consistently follow). FOR myself (and EVERYONE is different) I found
that
> > > taking a multiple contract position is the best way to go. I usually
take
> > > three contracts per account and peel them off one at a time. It feels
> > great
> > > when I lock in a handle to handle and a half profit on my first
contract.
> > > With a little profit in under my belt I'm more objective and less
> > emotional.
> > > I then bring my stop up on the other 2 and look for my next
> > > support/resistance target to exit another one. Then I TRY to hold the
> > last
> > > one for a big gain.
> > >
> > > 5) I read a quote last night off www.innerworth.com. I don't have it
in
> > > front of me but to paraphrase: 'The difference between a professional
> > > gambler and a professional loser is that a professional gambler gets
up
> > and
> > > leaves the table when he has reached HIS goal. The professional loser
> > stays
> > > at the table until he's lost all his money and has got to stop
gambling.'
> > > Taxi drivers don't have to combat the inner demons that may cause a
trader
> > > to force himself out of the game.
> > >
> > > Just my thoughts,
> > > Howard Hopkins
> > >
> > >
> > > >From: Brian Keith Voiles <admagic@xxxxxxxx>
> > > >Reply-To: realtraders@xxxxxxxxxxxxxxx
> > > >To: TaoOfDow <TaoOfDow@xxxxxxxxxxxxxx>
> > > >CC: realtraders@xxxxxxxxxxxxxxx
> > > >Subject: [RT] Re: Profit Taking
> > > >Date: Sat, 17 Nov 2001 22:50:40 -0700
> > > >
> > > >Richard!
> > > >WOW!... thank you so-o-o-o-o much for your thoughtful, meaningful
reply.
> > > >I really appreciate your insights, and I know they will benefit me
> > greatly.
> > > >Warmly,
> > > >Brian
> > > >
> > > >At 06:20 PM 11/17/2001, you wrote:
> > > > >Dear Brian, Rich, Group, et al.,
> > > > >
> > > > >Brian, your note brought up for me an academic study that I read
> > several
> > > >years
> > > > >ago about taxi drivers in New York City. There, the economics of
being
> > a
> > > >taxi
> > > > >driver is that one does not own one's own cab. Instead, one
becomes
> > > > >associated,
> > > > >as an independent contractor and not as an employee (for reasons of
> > > > >minimization
> > > > >of the risk of legal liability), with one of several taxi companies
in
> > > >NYC.
> > > > >Then, whenever one wants to drive a taxi (which, because the driver
is
> > an
> > > > >indep
> > > > >contractor, is entirely in his or her discretion), one reports to
the
> > > >taxi
> > > > >company and leases a cab for what I recall is a 12-hour period, at
a
> > > >fixed
> > > > >rate,
> > > > >something like $75 for the period, on the understanding that the
driver
> > > > >keeps all
> > > > >the fares he or she collects during the period. So, the deal is: A
> > fixed
> > > >cost
> > > > >for the use of the cab during the period + 100% of whatever you
> > > > >collect. These
> > > > >economics for taxi drivers are similar to those for private
traders,
> > such
> > > > >as us.
> > > > >We put up $$$ for our equipment and real-time data for the day (in
> > fees,
> > > > >rent, or
> > > > >amortization of expenditure) and keep all the profits (or losses).
> > > > >
> > > > >What the academics found when they interviewed the drivers was that
> > upon
> > > > >leasing
> > > > >a cab for the 12-hour day, the drivers largely adopted one or the
other
> > > >of two
> > > > >strategies:
> > > > >
> > > > >1. Drive all 12 hours, in the attempt to maximize their total
> > > >collections for
> > > > >the day.
> > > > >
> > > > >2. Drive until they collected an amount that each driver, on his
or
> > her
> > > > >own, had
> > > > >predetermined, after which they would turn the cab back in and call
it
> > > > >quits for
> > > > >the day. Here, for example, if the driver's goal was to collect
$200
> > > > >during the
> > > > >day, if he did so before the end of the 12-hour period, he would
quit
> > > > >early and
> > > > >take home $125 for the day, after having paid the taxi company $75
for
> > > >the
> > > > >day's
> > > > >lease of the taxi.
> > > > >
> > > > >The academics then analyzed the statistics of who made what and
how.
> > > >What
> > > > >they
> > > > >found was that the drivers who drove for the entire 12 hours
> > consistently
> > > >not
> > > > >only made significantly more money on a daily basis but, as I
recall,
> > did
> > > > >so even
> > > > >on the basis of hours driven. (This possibility arises because
the
> > > > >drivers who
> > > > >drove until they collected their predetermined amount necessarily
quit
> > > > >before the
> > > > >end of their 12-hour period if before then, they had collected
their
> > > > >pre-determined amount). While the academics could not prove it,
they
> > > > >speculated
> > > > >that these results arose because of what they saw as a random
> > fluctuation
> > > > >in the
> > > > >demand for taxis from day to day --- specifically, they speculated
that
> > > >such
> > > > >demand is largely a function of the amount of tourism in NYC: when
> > there
> > > > >are lots
> > > > >of tourists in NYC, the taxis are full and vice versa. This is
random,
> > > >in the
> > > > >sense of being unpredictable, in that no one really knows when the
> > > > >tourists are
> > > > >going to descend on NYC. Some days, particularly when there are
lots
> > of
> > > > >conventions or some other big event, like the World Series, they're
> > > >there;
> > > > >other
> > > > >times, they're not, leaving the taxis are largely empty. The
academics
> > > >also
> > > > >speculated that demand turned as well on the weather, which may be
even
> > > >more
> > > > >unpredictable --- when its cold and rainy, people want taxis; when
it
> > > > >isn't, they
> > > > >don't.
> > > > >
> > > > >What the academics furthermore found was that but for the periods
when
> > > >the
> > > > >tourists were in town etc., it really didn't make much difference
which
> > > > >strategy
> > > > >the drivers employed --- they all made about the same money per
hour of
> > > > >driving
> > > > >--- when you drive more, you make more money, as one would expect..
> > > >Where the
> > > > >difference was clear, however, was when the tourists were in town,
it
> > was
> > > >cold
> > > > >and rainy, and taxis were at a premium, which was largely
> > unpredictable.
> > > >But
> > > > >when one or more of these factors did occur, the 12-hour drivers
made
> > > > >significantly more money than did the "drive to a pre-determined
> > amount"
> > > > >drivers,
> > > > >which seems to make sense --- one makes make money as a supplier
when
> > > >demand
> > > > >increases.
> > > > >
> > > > >Now, I am assuming that one's purpose for driving a taxi is to
maximize
> > > > >one's net
> > > > >profit per unit of time expended, and not out of a desire for
public
> > > > >service or
> > > > >meeting people or the sheer pleasure of driving around town, by
> > oneself,
> > > >with
> > > > >others, or whatever. Given that purpose, the first basic question
> > facing
> > > > >a taxi
> > > > >driver is "Am I going to drive today?" If you're not going to
"drive"
> > > > >today, it
> > > > >doesn't make any difference whether the tourists are in town or
not,
> > what
> > > >the
> > > > >weather is, or whatever --- you ain't gunna make any money because
you
> > > >ain't
> > > > >drivin'. But as long as a driver has made the decision to "drive"
> > today
> > > > >in the
> > > > >attempt to maximize one's profits on a time basis, and as long as
> > nobody
> > > >can
> > > > >predict when the tourists will hit town, or will it rain and be
cold,
> > and
> > > >if a
> > > > >driver has already paid the $75 for today and is now driving, then
> > > > >according to
> > > > >what these academics found, the driver should continue to drive to
the
> > > >end
> > > > >of the
> > > > >period no matter how much fares have been already collected today.
> > This
> > > >is
> > > > >especially true if, during the day, the driver believes that the
> > tourists
> > > > >are in
> > > > >town, it cold, or its rainy. But it also makes sense to continue
> > simply
> > > > >in the
> > > > >hopes that the tourists will show up, or it will turn cold or rain
> > during
> > > >the
> > > > >remainder of the period. Its makes sense at the margin --- it
doesn't
> > > > >cost you
> > > > >any more to continue driving because you have already paid your
fixed
> > > >cost, so
> > > > >all the remaining profits are the driver's without any effective
> > set-off
> > > >for
> > > > >costs. Regardless of whether the driver continues because he is
having
> > > >an
> > > > >especially good day or on the hopes that his day will become an
> > > >especially
> > > > >good
> > > > >day, it makes sense to continue, because that is when the demand
for
> > > >taxis
> > > > >(which
> > > > >cannot effectively be predicted) increases and gives the driver the
> > > > >opportunity
> > > > >to make unusually large profits. This opportunity will be forgone
if
> > the
> > > > >driver
> > > > >call it quits early, after collecting a pre-determined amount, and
turn
> > > > >his cab
> > > > >back in. The nut of this situation seems to me to be that the time
it
> > > > >takes to
> > > > >collect some pre-determined amount of profits doesn't have anything
to
> > do
> > > >with
> > > > >the demand for taxis today. If anything, those two variables seem
to
> > me
> > > > >to be
> > > > >inversely correlated. If demand for taxis IS high today, then one
will
> > > >likely
> > > > >collect one's pre-determined amount more quickly, and given that
> > > > >situation, that
> > > > >is the very time when one's expenditure of his or her own time
driving
> > > > >taxis will
> > > > >be exceptionally repaid in profits. As such, this is just the time
> > when
> > > >it is
> > > > >the most economically counter-productive to quit driving --- this
is
> > the
> > > >time
> > > > >when one should drive no matter what, in order to maximize one's
net
> > > > >profits per
> > > > >unit time, and resist the temptation to quit early, after having
made
> > > >some
> > > > >predetermined amount especially quickly.
> > > > >
> > > > >This situation with the taxis sounds to me similar to the situation
> > with
> > > > >trading. Who knows when a trend will begin, but for a trader, just
> > like
> > > >a
> > > > >taxi
> > > > >driver, the time to be in the market is when it is trending, as it
is
> > > >then and
> > > > >only then when the market gives a trader the opportunity to make
> > > >unusually
> > > > >large
> > > > >profits, which the trader will forego if he or she call it quits
early,
> > > >after
> > > > >collecting a pre-determined amount, and goes on with the rest of
his or
> > > > >her day.
> > > > >
> > > > >The concern that Rich expresses in his note, in which you sound in
> > > >harmony, is
> > > > >the inability to predict whether an incipient market move will
peter
> > out
> > > >after
> > > > >3-5 points or extend for 10-15. And the concern that you
specifically
> > > > >express is
> > > > >the efficiency of quitting the market after having made some
> > > >pre-determined
> > > > >amount of profits. These concerns sound similar to the questions
> > facing
> > > > >NYC taxi
> > > > >drivers: Are the tourists in town? Will it turn cold? Is it about
to
> > > >rain?
> > > > >Does
> > > > >it make sense for me to drive today, and especially to continue to
> > drive
> > > > >once I
> > > > >have already paid my daily lease fee (regardless of how much I have
> > > >already
> > > > >collected today)? If these concerns are similar, then the results
of
> > > >this
> > > > >study
> > > > >of NYC taxi drivers suggest that for taxi drivers as well as
traders,
> > > >higher
> > > > >profits per unit time expended can be realized by employing a
strategy
> > of
> > > > >working
> > > > >through the day as opposed to quitting after reaching some
> > pre-determined
> > > > >amount
> > > > >of profits.
> > > > >
> > > > >I hope the foregoing discussion provides some encouragement for you
to
> > > > >reconsider
> > > > >your decision and see if it best fits your goals.
> > > > >
> > > > >Sincerely,
> > > > >
> > > > >Richard
> > > > >
> > > > >
> > > > >
> > > > >Brian Keith Voiles wrote:
> > > > >
> > > > > > Rich,
> > > > > >
> > > > > > I am in the exact same boat as you. I think it's a personal
matter,
> > > > > really.
> > > > > > My daily goal is to make 4 handles... $1000 less commissions. I
> > break
> > > > > > my daily goal into two, two-handle trades. Then I turn off the
> > > >computer.
> > > > > >
> > > > > > If I lose 4 points, I call it a day, as well. That's the max
I'm
> > > > > willing to
> > > > > > lose on any given day.
> > > > > >
> > > > > > As my account builds, it's my intention to trade 2 lots, 3 lots,
and
> > > > > > eventually 4 lots. (Right now I can't "see" past 4 lots --
maybe
> > when
> > > >I
> > > > > > get there...).
> > > > > >
> > > > > > I think the reason I've chosen to do it this way is because I
don't
> > > >really
> > > > > > perceive myself as a "real" trader. Let me put it differently:
> > > >trading is
> > > > > > not who I am -- it's what I DO to facilitate the living of my
> > dreams.
> > > > > >
> > > > > > In other words, I don't want to eat, sleep, and breath trading
24-7.
> > > > > > I use the $1000 a day (soon to be $2000, then $3000, and then
> > > > > > eventually $4,000) to allow me the time freedom and money
freedom
> > > > > > to live my dreams. Which for me is:
> > > > > >
> > > > > > 1) being a great "stay at home" dad for my kids
> > > > > > 2) writing and studying music
> > > > > > 3) writing inspiring stories and books about life
> > > > > >
> > > > > > Having said all this.... it would be really nice to let the
profits
> > > >run
> > > > > > on occasion. I haven't found a "real" answer to your question.
For
> > > > > > I, too, have had the same experience in the past as you have...
that
> > > > > > of:
> > > > > >
> > > > > > "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 I have to be willing to give back a fair amount of
profit."
> > > > > >
> > > > > > This is my experience as well. BUT... that's what led me to the
> > > > > > decision I've come to: "Make 4 Points Today, Then Go & Play"!
> > > > > >
> > > > > > I'd love to hear what other feedback you get. Please keep in
> > > > > > touch... I'll add you to my list of S&P traders whom I try to
keep
> > > > > > in contact with.
> > > > > >
> > > > > > Warmly,
> > > > > > Brian Keith Voiles
> > > > > >
> > > > > > At 08:34 AM 11/17/2001, you wrote:
> > > > > > >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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