Often traders say, “If I had just taken profits.” If they had taken profits their day would have been profitable and all would be good with the world.
When a firm trader says that to me you might hear me respond, “I do not know what this means.”
And it is not sufficient for trading improvement.
Let’s examine a review last night from Trader A:
The main issue I had today was not scaling out of positions in SPY and QQQ looking for bigger moves and having them reversing and stop me out. I was expecting the markets to have a trend day given the gap and hold over 265 however they never really trended.
I like the part where Trader A recognize the issue- taking profits. But again I don’t know what this means. If your trade was to hold for the big move then why are you carping about not taking profits? You were making a longer term trade, that has a lower win rate. You signed up for significant unrealized profit and reversal of gains. You were making your trade in your PlayBook and it didn’t work out.
Now there may be an issue that you should not have been holding, but that is a separate issue.
Also, you may have rules to take profits while holding a core. And thus not taking profits violated your rules. Okay I get that. Now you ought to criticize your trading.
But then often we see traders who have rules that are not specific enough. They have not written them down in enough detail, or committed to them properly. Let’s examine a review from Trader B last night:
The area that I could have done much better at today is taking profits. I followed my rules in terms of holding a large enough core, but I did not follow my rules in terms of scaling some at intraday high/low levels. There were multiple occasions where I had a relatively large profit from an advantageous price (with a properly raised stop to near break-even) and let the profit get back to zero without taking any off at intraday extremes. If I have in my mind that these trades can be big trades, and I have created somewhat of a cushion from working a good price and holding, this does not mean that I should break my rule and not scale any at the highs/lows. These were good trades that I did not capitalize on today because I did not follow this rule. Part of the advantage of being bigger in these trades (which I was today) is that I can more easily scale in order to monetize the price path.
Notice how much better Trader B’s plan is. He has rules to scale out of winning positions. He did not adhere to his rules. This is a mistake. What I would love to see in more detail from Trader B is the detail of his rules. What does it mean to take profits “high/low levels”? I would like to see a next sentence digging deeper into the variables of his taking profit rules, the trading conditions where he did not exit, and why.
When you lack detail in rules it creates confusion in real-time on whether to take profits. So a failure to take profits, may be a failure of detail in rules. You might be sitting there in real-time asking: is this meeting my rule? You do not want to be in that position.
Also, I would suggest Trader B develop more comprehensive rules. Is the only time to scale out of profits, at “high/low levels”? I hope not.
So if you want to be a pro trader and say, “I should have taken profits.” Then tell me what detailed rules you failed to follow in your trading for taking profits. And work on making those rules comprehensive so you make better trade decisions.
I hope that helps.
Talk to you soon.
*no relevant positions