In This Episode
- Everyday Traders by Nick Radge
- Specific trading rules to help you follow your rules
- The guy who used bank entry signals to trade, but threw out the exit signals
How to Stay in Trades Longer?
This is one of the most common questions that we get. It can be hard to break the habit of exiting winning trades earlier, but in this episode, we break down how it can be done.
…and there's one answer that you probably won't like.
Read the Transcript:
Walter: Hi, Hugh. So I had a trader write in and he was talking about he had this issue where he was comfortable with his trading system, he's comfortable with his risk. All that was good but he had the problem of not holding his trades to the point of taking to the take profit point. So what would you say to that?
If someone came to you and said, “Look, everything's good. It's just I keep pulling the trigger and dumping my trades too quickly. I am not going to where I wanted to take profit at the beginning of the trade.”
Hugh: That's a tough one. I mean, you have to put something in place that is going to almost force you to stay in the trade. Either, have an accountability partner or you have a protocol where you just shut off the computer. Or, just consciously force yourself to, you know, stay in the trade.
Create a policy. Write something down that says, “I am going to stay in the trade until the stop loss gets hit or the take profit gets hit” or something like that. I mean, it is really a matter of discipline I think but it is tough to institute for sure. What do you think?
Walter: I agree. I would recommend reading. If you can get your hands on the Nick Radge book, Everyday Traders. Scott Barlow chapter. He is the only Forex trader in there but the other guys are all basically systematic stock traders which is what Nick teaches.
Nick is a great guy by the way. I've met him. He is a really cool guy. The interview with Scott really changed my whole thinking on that because the guy was talking about this exact thing. He is like, “Look, it's up to me to make sure that my system has the right risk to reward” and his was three to one.
So he always, always no matter what did three to one. Held to three to one. I tried to interview him but he does not want to be interviewed. He was interesting because he actually offloaded the signals to a bank. So the bank sent him Forex signals. And he would take the bank signals but he would disregard their profits. He would just hold for three to one. So, really, really interesting guy.
I think that a trading accountability partner helps. You could also just say, “Hey look, if on Monday I take a trade and I say that I am going to wait for it to go two to one and I don't, then I can't trade for the rest of the week.” So you have like you know, set up these like you're saying sort of a reward system.
If I do what I am supposed to do then I can take another trade this week or this day or whatever it is. I mean, it depends on the time frame. So you are basically forcing yourself to get to a point where you are doing what you said you would do in your trading plan. If you are not, you start to lose your trading privileges like you are saying. Trading accountability partner can really help with that.
Hugh: I think there is a tendency to want to rely on an app or like a special system or something like that, to solve these issues. But I think at the end of the day, you really have to face yourself and say, “Hey buddy you are not doing what you said you would do.” So I think that's what it comes down to.
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.
At the end of each month, we'll look at the comments and reviews from the month and we'll pick a winner at random. Each comment and each review counts for one entry during the month that it's pitted.
So, if you're interested in that, be sure to enter after this podcast is over. Alright, back to the episode.
Walter: I have a chart like a spreadsheet and it shows when your risk to reward shifts and you just shift a little bit over, how much more likely you are to have a terrible draw down you know or blow up your account. It's fascinating to see how close, most of us, we trade right on the edge.
So if we start moving our two to one system, it starts becoming a one-point-seven-five to one or one-point-six-five to one. Instead of a two to one because we're so antsy to take profits. It is bad news. It's amazing how quickly you can fall off the cliff if you're not on the right side.
So that's another thing that can impact your logical thinking like, “Okay, if I don't stick to my two to one exit here, I am probably like I've literally tripled the likelihood that I am going to blow up my account.” This is bad news.
Hugh: Maybe post it on your wall or something in front of you.
Walter: Exactly. That sounds like a great idea.
Hugh: Okay, cool. Thanks, Walter.
Walter: See 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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