Should’a
October 31st, 2008 by 
reality
I may not have learned much, but one thing is that a closed trade is over, for better or for worse, and there’s no sense in beating yourself up about money left on the table. By all means mistakes are a learning opportunity (either you earn or you learn) but self-flagellation is unprofitable.
In other financial trivia, if you know anything at all about computers you know who Donald Knuth is. If you are a programmer you probably have a well-thumbed and Post-It tagged set of the “Art of Computer Programming” on your bookshelf. Sadly, modern financial fraud has put an end to Prof. Knuth’s practice of sending out a check for $2.56 to anyone who finds an error in his work.
Unfortunately, though, he’s been forced to stop because of bank fraud. “The system that I’ve been using has worked well for almost forty years; but recently I have had to close three checking accounts, and the criminal attacks on those accounts have caused significant grief to my bankers,” says Knuth.
Posted in Truth and Trivia | 
October 31st, 2008 at 10:35 am
I had an earlier post asking if anyone knew of a good resource educating when to close a trade. Opening is relatively obvious and easy. I really struggle knowing when to get out or take $ off the table. So I empathize.
Without answers, I’ve evolved to follow a few principles.
In general, take $ off the table on a steep slope move. (eg, when the market goes up or down 12% in a day). You reduce risk of losses when you are out of the market.
The next day, with all cash, you can open a trade going the other direction which (by definition) continues the slope move even more, increasing the chances for a reverse in direction. If it goes back down (up) the next day, you can buy back in at a cheaper price than yesterday’s close.
Follow the same principles over a long period of time. More swings of the bat actually reduce your risk. And you only need to be ‘right’ 51% of the time to make a profit. With buy and hold, you only get 1 swing at the bat (hoping for a home run).
October 31st, 2008 at 10:42 am
It is all about money management and exit strategy. It has been shown that proper money management and exit strategies make trading profitable even with random entries.
October 31st, 2008 at 11:09 am
Thank you for your advice. I just ordered “The Encyclopedia of Trading Strategies”.
I appreciate your efforts to manage and author this site.