Saturday, March 13, 2010

Cutting losses and riding profits

Which is easier to execute, cutting losses or riding profits?

A simple question that traders should ask themselves to determine the trading style that suits them. Long term position trader FSK revealed that it's difficult for him to cut losses but it's so easy for him to ride profits. He can hold a position for months and even years to ride the long term trend until there is a U-turn sign. There is almost no cut loss level for him, he invest in a few countries that offer the best returns through his proprietary formula.

As a scalper, it's the total opposite, it's so difficult for me to ride a profit and I won't be making money if I don't cut my losses fast. And for those who find it difficult to execute both, will find themselves struggling to survive in this very competitive game.

2 comments:

Warlord said...

It is always painful to cut loss. However when the trend turns against you, it is necessary. If you wont cut at 10%, the subsequent 20%,30% and even 50% you will still let it drop. In the recent earthquake in Pahang, Indonesia, a man has to sever his limb in order to survive as it is trapped by a heavy object. I really admire his courage & determination.

Fat88Trader said...

Wow, I guess he didn't have a choice, poor guy! He did the right thing and survived.

In trading, we have a very simple choice and yet 90% of the traders fail to survive, it takes them too long to make that painful decision.