In This Episode
- How splitting positions can help with patience
- Why you might want to do an “exit race”
- The 3 best ways to improve your ability to stay in trades
How Can I Be More Patient With Letting My Profits Run?
This is a question from a viewer and a common issue among traders. The trader knows that they should stay in their winning trades longer, but they have a tendency to exit early.
We answer the question by giving the top 3 ways that we know of to stay in winning trades longer and reap the rewards of a good run. Implementing any one of these suggestions can help you improve your trading returns.
Read the Transcript:
Walter: Hi, Hugh. So we have a question here from a trader. He's writing in and he's like saying that he doesn't really have the patience. He knows that he needs more patience with his positions, with his winners but he keeps pulling out of the winning trades too quickly. He knows that this is the case. He said, “Well, what should I do?”
I said, “Well look, this is what I would do. A couple of things you might look at doing. Number one is, first of all, you can split your positions up. So if you're worried that you know you should be taking profit now because it's up and, you're worried that you're going to lose all that profit then just split it. Have some sort of a target and then for the remaining bit have a trailing exit.”
Which is what I like to do. I think it's kind of fun to have one. Sometimes your trailing exit will make way, way, way more but a lot of times it may make a little bit less or around about the same as the original; the position where you have the target, that's thing number one.
Thing number two is, try and see if you can automate your exits; that way you don't have to think about it. So if you are like, if you're going to do that, let's say, you go, “I am going to go two to one.” So I'm going to go risk fifty pips to make a hundred on half of my position. On the other half, I am just going to run my trailing exit.
You can put a script on there, it doesn't matter which platform. Almost all of them allow you to do this and so what that does is it takes you out of the equation. So once you take the trade you know, “Well, I've made my decision which is to take a trade.” Now, the computer will do the rest. It will get me at the target level or I'll get stopped out and it will get me out of the trailing exit or, I'll get stopped out.
So it's kind of an easier way. What's happening is you're shifting that psychological burden off of you and onto the machine. Now you can still jump in and you can still turn it off. All that stuff can still happen but in theory, if you are doing this and you're doing it correctly, you're not going to have the issue of you know having to deal with that psychological burden of, “Oh, I made the wrong decision” or “How do I know if I'm making the right decision?” Because you've decided to do both.
You decided to take a profit and you've decided to let it run. You've also decided to let the computer do both. Do you know what I mean? It is no longer in your hand. So that's one way to do it and for some people that's a really easy way to deal with that. Even though you know sometimes we feel like we want to make the right decision.
If you do that you're almost always, if you have a winning trade that is. If you have a losing trade it doesn't matter but if you have a winning trade it almost always feels like you've made at least a little bit of the right decision.
Hugh: Hey there! I hope you find this episode useful. I just want to let you know that Walter and I give away something valuable every month that helps traders improve their skills. You can enter to win by simply leaving an iTunes review and leaving a comment on our YouTube videos.
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Walter: If it really goes and your trailing exit is able to take some of that profit or a big piece of that profit, you feel really good. If it doesn't really go and your trailing exit you know gets a little bit very, very small profit or, around break even, or a little bit of a loss and then, your target actually makes money for you, you feel good too.
So it's kind of a nice way to deal with that and obviously there's lots of other things that can happen. You could get stopped out or you could lose on the trailing exit. Which happens for me sometimes and yet make money on the target you know depending on how tight your trailing exit is. There's lots of things in there. It's not an ‘either-or’ situation. For some people that's a very good solution.
Hugh: Those would be my first two recommendations also but maybe like a just third one would be just practice more. Go into Forex Tester and just practice the setup and the exit; just review your journal a lot more. Look at what happens when you stick with the exit or the trailing exit and that can help you boost your confidence to stay in the trades, I guess.
Walter: Yeah and I’ve done tests on that. Exactly what you're saying. So you get your Forex Tester data and you go, “Okay, what if I use this trailing exit versus this one?” You’ll see the difference and that can convince you that it really is worth it. Even a lower win rate and a trailing exit that's going to yield a lower win rate but more profitable overall because it allows you to have really, really big winners occasionally and that makes all the difference.
So it's a good point that you should know. Definitely think about running that sort of, I call it an exit race. Where you have these two different types of exit. You want to see which one is going to be the winner here and try that multiple times.
Especially if you're just using targets now and you're not using a trailing exit like that's a real easy win. In a lot of cases not always but in a lot of cases. So that's a great way to show the logic of being more patient. So it makes sense you know well I can see why I should do that because it's actually going to help my trading quite a bit.
Hugh: Cool, great point. Thanks, Walter.
Walter: Thank you.
Hugh: All the information in this podcast is for educational and informational purposes only and is not trading or investment advice.
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