Friday, 22 June 2018

Let your winners run

Should you let your winners run or take profit off the table?  This was the question I was trying to find an answer for my day trading setups in stock futures.  Nifty & Bank Nifty being an Index and less volatile typically remain range bound most of the trading days, so taking profit off the table once prices stall at good level, I thought, was a good exit strategy whenever in profit.  I tried to apply the same logic to my stock futures intraday trades and booked out profits at predetermined profit targets.  Some time later I realized this is not the correct way to book profits.  If the stock is moving nicely in favor and is looking good for further move, 2%-3% or even 5%-7% more, then why to kill the winning trade so early.

I maintain my trading data, so I decided to analyze those data more closely.  It was clear after some number crunching that 3 to 4 trades out of 10 stock future trades moved a lot during the day and turned out to be a jackpot trade.


Let's try to understand this Jackpot sort of trade better with today's trade example.  I took a short trade in SRF futures at 1755.50.  It started moving quickly in favor with momentum almost immediately.  So I decided to let it run.  Earlier I used to book out such trades at 2 times of my initial risk in the trade, but this time was different.  Finally, it kicked me out hitting my trailing stop at 1701.50.  It gave me reward of Rs. 27K on an initial risk of just Rs. 3K


It still continued to move further, but I had no regret this time as I remained in the trade as long as it allowed my stay there.

Let winners run and cut losers short & quickly!

7 comments:

  1. Today I did same..probably first time I traded both nifty and banknifty same day and profited in both..rare occasion

    ReplyDelete
  2. Replies
    1. Go through this old article on it,
      https://charttechnicals.blogspot.com/2016/07/trading-stocks.html

      URD

      Delete
  3. This is nice trade. One query. can i trade with 50K capital in futures? risking the same amount as you are doing.

    ReplyDelete
    Replies
    1. Thanks. Technically you can trade with help of bracket order or cover order. But I will suggest you to keep around 70k.

      URD

      Delete