The Roman philosopher Seneca wasn’t talking about the stock market when he wrote that “T...
3 Ways to Let More of Your Profits Run
07/17/2012 3:19 pm EST
Hubert Senters explains a few methods for staying in winning trades longer.
One of the things that Dennis Gartman is famous for saying is that good traders are impatient with losing trades, and very patient with winning trades, which is the opposite of what most people do. Our guest today is Hubert Senters to talk about that. So Hubert, how can I hold onto my winners for longer to make more money?
It is a great question. It is one of the hardest things in the world to do. The only possible way that I have figured out the secret to doing it is I place a trade, and then I place a stop, and I leave an open target on it. Then I leave the computer screen. That is the only way that I have figured out how not to take myself out of a profitable trade because I don’t know about you, but I never get smarter once I’m in a trade. I almost always make the worst possible decision I can once I’m in a trade. So the best thing for me to do is to just leave it alone.
Alright, now you said open profit target. What if it hits a nice profit, and then comes back down, but you’re not there?
Well that’s, I mean, that’s one thing. So at least you have a stop loss, but that’s the double-edged sword. It depends on if you’re trading in the e-mini that kind of runs, stops, and reverses, or if you’re trading something that trends well. It’s going to depend, but that’s a problem with the strategy, or the downside. In order to be in a big move that’s going to take you up, you’re going to have to leave that stop there, and just see if you’re either going to get stopped out, or if you get that massive target hit.
Alright, and let’s talk about that target, because if you leave it open initially at some point, you’ve got to decide when enough is enough.
So where do you kind of look for that?
If you’re trading intraday futures and stuff like that, try to hold it until the close because it’s hard enough to make a profit as a day trader. If you can just open up your mind a little bit and say hey, I’m just going to hold onto it for the next one to three days, you’ll be surprised that you’ll already be in a market so that you’re not dealing with big gap bumps and big gap downs. You’re already in that move. Then if you get a big gap up or a big gap down it’s a gift, and now you have the hard decision. Do I cut it loose, or do I hold onto it a little bit longer?
What about the idea of scaling out, taking half off?
I’m a big believer in scaling out, especially on index futures. I go all in, and I scale out half, quarter, quarter. And what I do is in three quarters of the trade position, I always do it mechanically. The last quarter, I’m always swinging for the fences and trying to hold onto it as long as I possibly can.
You let that last quarter go all the way to your stop?
Yeah. Unfortunately sometimes I will. It’s just a double-edged sword. I don’t want to tighten up the stops so tight to where it’s like a leash with a dog around my legs tripping me up. So I have to loosen it up a little bit in order for it to take advantage of some of the market gyrations, and give it a chance to actually grow.
Hubert, thanks for your time.
Related Articles on STRATEGIES
The Dow Theory was originally referred to as “Dow’s Theory,” since it was based on...
When stocks are selling at valuation extremes and consumer optimism is at one of the highest levels ...
The stock market is still bullish but it’s flashing yellow caution signals that are even brigh...