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Old 08-11-2008, 08:00 PM   #7 (permalink)
David Waring
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Hey Dave,

Thanks again for the compliments I am glad you like the site and are finding it useful. Below are my thoughts on your questions:

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In an ideal world I would have a strategy whereby I can analyse charts for an hour or two, place a number of trades when the right signals are on, then walk away and "forget" about them feeling fairly confident that I will get a 40-50% success rate. Sounds too good to be true I know.

Partly this would be so I could use my time for other things and partly so that I would be shielded from emotional decisions which could ruin my profits when it comes to trading real money. So far I have found this to be my biggest downfall.

Do you think it is realistic to ever be able to do this or should I concentrate on following my trades?
One of the most important and often overlooked things that a trader can do in my opinion is build a strategy which fits into their personality so I like the direction you are going here.

I believe that it is absolutely possible to spend 1 to 2 hours a day analyzing the market and putting your trades on and then walking away. The key here in my opinion is developing a strategy that incorporates the fact that you will only be analyzing the market for an hour or two a day and you will not be sitting in front of your computer watching the trades as they happen.

In my opinion you will probably want to steer clear of day trading as a result of this and try and work out a strategy which is more swing to long term.

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I mean, the stop loss should be strategically placed to allow the leeway for a successful outcome anyway, at the same time as automatically limiting your losses, right? Or....does the stop loss become irrelevant and meaningless after a certain point? It sounds weird but I try to embrace my wins AND losses as a vital part of a winning strategy and get some satisfaction out of the fact that they are under control. Maybe I'm nuts and should be cutting my losses as soon as I see the trade going against me.
I definitely agree that a successful trader needs to learn to embrace both their wins and their losses but I am not sure if I am understanding what you mean by does the stop loss become meaningless after a certain point.

In my opinion it is trading suicide to trade without a stop loss or at least a pre determined point where you will manually close the trade if you do not enter the actual order.

When you ask if you should be cutting your losses as soon as the trade begins to go against you in my opinion that depends on what you mean by the trade going against you. The idea of a stoploss in my opinion is first to protect the account from losses that violate your money management strategy. Second it is to allow your trade enough room to breath through normal market movement without taking you out of the trade before you hit your profit target.

Does this mean that you cannot close out the trade before the market hits your stop? In my opinion no, but when you do this it should be because something has changed about the initial reasons why you entered the trade that negates your initial analysis, not simply because the market started to move against you.

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Also, do I trust my profit targets in the same way? My current thinking is that if I place them comfortably before where the estimated target is, I can trust they will usually be hit if the trade goes my way. Without a fairly large degree of trust it seems like the risk/reward calculation made before a trade seems almost meaningless.
In my opinion yes the same answer that I gave above for the stop applies to the take profit order as well.

One thing I think you will find very benificial here is if you keep a trading journal. This will allow you to see if the times when you exit trades before your stop or take profit is hit is based on sound analysis or simple emotion.

As a general rule here as well, I would say the less experienced the trader the more important it is to stick to your original plan as emotion instead of a good feel for the market is more likely to be the driving force behind deviating from your plan when you are starting out.

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Sorry for the waffle and multitude of questions! I tend to get carried away which is one of the reasons I want as emotionless a trading system as possible.
No worries that is what the community is here for. If there are any other questions or comments please feel free to post as always.

Best Regards,
Dave
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Disclaimer: Trading is risky and can result in substantial financial loss. As always my posts are simply one traders opinion and should not be taken as trading advice. I am not a financial adviser so everyone please do their own analysis and take responsibility for their own trades.
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