Let Your Winner's Ride and Cut Your Loser's Short
By Cliff Clark
“Let Your Winner's Ride and Cut Your Loser's Short”
Have you ever heard this phrase? Do you practice it religiously? If you do, can you please explain to me how exactly we as day trader's can implement this? I'm asking because I have never been able to figure this out. I mean, in theory it sounds great, but in practice at least on a short term basis we have no real way to figure out how far a stock can go.
Many of you have complained to me that you have been trading for a long time and are still just break even trader's. I am guessing that is because you try to cut your losers short (selling to soon). I've found that new trader's or most trader's for that matter rarely ever let their winner's run.
A better way is to have a well defined plan that explicitly states your entry and exit points, based on patterns from a chart. If you have a plan, test that the plan actually works as stated and have the patience to follow the plan you will slowly turn yourself around.
If you are a new trader or have been trading awhile and still losing money or breaking even and have no plan or have a plan you can't follow, start today, write a plan and test it. With a well written and tested plan you will see results with persistence.
Some of you have been doing the same thing for years with no positive results to speak of. I'm afraid to tell you that that will not change until you do!
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.