A ?4 the Trading Community (Part II)

BellaGeneral Comments, Mike Bellafiore's (Bella's) Blogs2 Comments

I received the email below from an SMB Blog Reader:

I’m sure you are really busy so I don’t necessarily expect a reply or anymore of your time..I do want to say Thanks again however.

I have pinpointed my issue..and it seems crazy. I don’t seem to have the balls to saty in winners long enough. Every thing I went long in this week, and covered yesterday is up substantially more today…and , the one trade I took this morning ( GGAL  long 15.85) I did not put enough size on it..I seem to be chickenshit with profitable situations..and don’t know how to fix it. The classic mistake..not letting my winners fully blossom.

Don’t expect a reply or a fix..I will just keep working on it. I guess its a good problem to have but a problem none the less. LVS in play again today as well but not in it. Must be trading scared money and playing like a wuss because of it.

Thanks for letting me talk thru this…
A ?4 the Trading Community

1) What do you like most about his trading analysis?

I love how you accept the mindset of growth. Your email is an exercise to improve. Professional traders embrace the challenge of improving each day. Think in 6 months how much you will improve if each day your goal is to get a little better. All of those days will add up and compound. And you will have made substantial progress.

2) How would you review this issue differently?

I like the comments from Adam Grimes here where he asked you to think about your time frame.  Often new traders think they have not let winners run enough but they have.  Just because a stock trades higher does not mean you exited improperly.   For our trading controlling our risk is most important.  Trading to our plan is vital.  Seeing each trade as if you were to make it a thousand times is how you ought to judge your execution.

So when you say you are not letting your winners run enough I am not clear what that means?  What is your time frame?  What did you expect from the trade?  What were your planned exits if the stock traded in your favor?  Do not tell me that you did not let your winners run.  Say I sold a stock that did not meet any of my Reasons2Exit.  Say I sold a stock because I just wanted to lock in my gains.  Say I exited a stock, it went up five points higher but my initial exit was fine since I had a Reason2Exit.

Our guys often use trendlines as a way to exit a trade in their favor.  If the stock breaks the trendline then they exit.   If a stock meets a significant long term resistance level is another exit.  We create lists that give us a Reason2Exit.  If one of these elements on our list is present then we generally exit.  What happens afterwards is not in our control.

3) What solutions can he seek to improve?

Go back and examine your trades.  Develop a list of Reasons2Exit for your longer time frame trades.  Make sure these reasons make sense to you.  And then start working on these exits.  Journal.  Talk to your trading friends.  Review the charts of these set ups.  Visualize trading these set ups as Michelle B suggested.  Think about these set ups.  Develop your skill to exit.

Thanks so much for all those who offered their thoughts.  I hope we can do more exercises like this together so we all learn more.  For example, crosshairstrader shared this old post from Dr. Steenbarger that I am sure many of us had not read.  

I will be back later with my thoughts but would rather hear what you think.

Mike Bellafiore

Author, One Good Trade


2 Comments on “A ?4 the Trading Community (Part II)”

  1. I saw there are two cyclical questions: ‘Why I didn’t let my winners run?’ and ‘Why I didn’t take the profits?’. Both of these are in direct correlation with the trend of the market: up-trend and down-trend. I know that every time I get really frustrated by not letting my ‘winners run’, which in most of the cases means I didn’t caught the 80%+ of the entire move with 70% of my share size (although I did exit were my plan was but you know… ‘if only I had the balls to keep it 15M longer’..), it’s a sign that the market is changing and a big rip for my p&l is at the corner. And the reversal is true for the ‘I didn’t book the profits’.
    But I learned my lessons and… yes I take 200 shares in the first minute off the open in a stock which runs 150c..and I took only 40-50c as my original plan was! And?! Am I frustrated? No way because in order to catch the 1p move with 1k shares than the stock needed to have other parameters, not just running 1.5p like a maniac out of the open.
    My approach toward this matter is that I am very satisfied that I made a profit, hence I have another day to survive in the market and get better. And the things were I think I can get better is not by just ‘letting the winners run’ but to find better stocks/patterns and learn how to add. I guess it’s better to have patterns with a 80% probability and catch only 40% of the move than have patterns with a 35% probability and catch 90% of the move.
    And I thank again to Bella for making some points in the previous posts about how to add.

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