Connect with Peter on LinkedIn!

A well known and often touted saying is "sell your losers and hold your winners" but what does this really mean?

I will let the pictures of weekly charts below explain.

Look at where the prices are NOW to where the sell (losers)signal was given, which is the red dot.
 

More pictures with a story

Look at where the prices are now to where the buy(winners)signal was given, which is the blue dot. Notice there is no red dot (not yet)
 

So "sell your losers and hold your winners" but what does this really mean in technical terms and how is it implemented practically?

The charts above display trades from the 52 week high system I talk about on the website. The 52 week high signals are posted for FREE every week.

Lets look at some statistics about that method that give you a probability of what to expect, because good trading is a probability game, not a prediction.

In a bull market like we have now (determined by my Bull Market filter) the win rate of that system is around 55 to 60 percent. So about 6 out of 10 trades will win. So that leaves 4 losing trades.

From those 6 winners you will get about 2 good (big) winners, because with trend trading about 20% of your trades make about 80% of your profit.

The other 4 winning trades will win a little or break square.

So again.

2 big winners

4 moderate winners or break square

4 losers

Why is that so important to know?

Because if you do not SELL YOUR LOSERS you increase the losses and decrease the profit.

If you do not HOLD YOUR WINNERS you decrese the profit.

So: if you dont stick to the system you DECREASE YOUR PROFIT.

The trade you refuse to sell could turn into a big loser. The trade you dont hold until the sell could be your biggest winner.

Look at the charts again and imagine how poor your results would be if you held your losses and sold your winners?

In fact this is what a lot of traders do. I know that some of you are holding those losing trades above. I know that some of you at some stage had those winning trades but sold them out earlier, never realising the big move. The big moves is where the money is made.

It is that emotionally painful, self defeating and profit decreasing strategy that created the wise saying.

"sell your losers and hold your winners" 

Trading Courses

 I undertsand how difficult it is to implement a strategy like the one discussed above if you do not know the rules and fully understand the probability of a chosen method employed.

In the last news letter I mentioned I will be teaching some trading courses. I am in the final stages of securing dates and venues. That information will be emailed to you very shortly.

 Speaking of probability

The XAO has had a recovery in upward price action this week. The market remains in a slow uptrend supported with good volume. To steal a ZEN saying. "the path of least resistance" looks to be up, not down. 

Peter.

If Facebook is more you thing, friend him here!