Hi SE,
I've read all your posts and enjoyed them. I seem to have found a contradiction in your thought contained in this post. First you say:
"Currently I have an entry system that works for me. It is tailored to my needs and it speaks to me. I can see in a glance if the market is long, short or undecided."
Then you say:
"First, I believe that if I am not sitting at the computer watching charts and trading that I am not working. It doesn’t feel like work. This act of watching and not doing anything. I need to be working. This is not a good perspective and causes me to force trades"
Let me ask, if you truly have a system that works for you how can you be forcing trades? If the system generates a trading signal, take it, if it doesn't generate a trading signal, don't take it. Could it be possible you are trading when a trading signal is not generated?
Theoretically, whether this system generates a 100 trading signals a day or only one trading signal a week, you are not overtrading as long as you only trade when given a signal.
Here are my thoughts on taking profits:
Let the market tell you when to take your profit. There are a number of clues to when any particular move will end. They are:
1. Euphoric buying. (Increasing volume and pace of trades)
2. Panic Selling. (Increasing volume and pace of trades)
3. Slowing pace of buying or selling. (Decreasing volume and slowing pace of trades)
4. A move into a previously defined support or resistance area.
Of course, you may sell after any one of these events occurs and the trade will keep going in your direction. A way to minimize your regret is to scale out trading two or more contracts and sell the first contract when the first exit signal occurs, then move your stop to break even. Now you have a free ride and your profit is locked in. You cannot lose, you can only increase your gain or sell your remaining contract at break even.
Try not to beat yourself up about taking profits. This really is the most difficult aspect of trading. Mechanically, stops are easier to take than profits because you know exactly where to get out, assuming you have pre-defined your risk.
The other day I was watching "Who wants to be a Millionaire" and I saw a guy win 250K and he was so bummed out. What could possibly be bad about winning 250 thousand dollars? When you know you could have one 500K if you had just followed your instinct, gut feeling, or "Intuition" if you will. This guy KNEW the answer to the next question, and if he got it right he would have won 500K. He kept saying "Its gotta be this" over and over. But instead he went the safe route and didn't answer the question, automatically guaranteeing him 250K. When Regis said, "What would have been your answer?" and it turned out he was right, you never saw anyone get so depressed. The guy looked like his dog had gotten hit by a car, and he had just won 250 thousand dollars.
What I'm trying to say is, you have to listen to that little voice inside you that says "Sell Now", even if it is wrong. You have to go with your gut. Scaling out of trades allows you to go with your gut and get a free ride for any additional profits. With experience your gut feeling or intuition will become more correct, and you will be able to determine the difference between wanting to take a profit because the market is showing you one, and exiting your trade because the market is giving you a signal to exit.
If you can't trust yourself who can you trust? I don't think that guy on millionaire will ever get over what happened to him because he didn't listen to that voice inside. Fortunately, we as traders always get another chance to improve ourselves every market day as long as we keep our losses small. We always get another chance to listen to our intuition.
One more point, you said in one of your earlier posts:
"Very few traders have the mental makeup and discipline to immediately re-evaluate the market and re-enter a position after being stopped."
You also made a reference to taking a stop as "Psychological Damage". If you really think of stops in this way you will have problems with your trading. You have to put stops immediately behind you and get ready for the next trading signal, or you will not have a chance in this market. Trading is a game of probablilites, not certainties. There is a random distribution of wins and losses for every trading signal you get. You need to think like a casino, sure you will take some losses in the short run, but in the long run you will be a winner because your system gives you an edge in the market.
Great Prosperity,
Alex
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