What's up, Everyone All right? So in today's episode, I'm going to walk you through how to hold your winners longer. So this is one of the most common questions that beginner traders ask me. They'll say Russ. I have this terrible habit of selling my winners Way too soon I'll get in a trade, I'll get in the setup, it looks good, and as soon as I'm up just a little bit, I'll sell the whole thing.

The stock ends up going much higher and I'm either there sitting just watching it go without me or worse. I give in to the fear of missing out. Fomo. I jump back in, but too high and I end up stopping out for a loss, giving back my first profit.

And I'm the sucker who's a red on this stock when everyone else is green. and I had a good entry, but I just sold way too soon. How can I hold my winners longer? And sometimes the other side of this is Russ. I have small winners and I have big losers.

How do I turn that around? So that's the topic of today's episode. If any of that sounds familiar, you should watch to the end because this is something that is very common and I even fall into it from time to time. I've had periods where my average losers have been bigger than my average winners, and whenever I see that happening, I've got to slow down and figure out what's going on because it's not sustainable. Now I want to mention that over at Warrior Trading, one of the things that I've done is built out a trading Psychology team because I want to help traders who struggle with these mental roadblocks, not holding your winners long enough holding your losers too long.

These are these are mental roadblocks that can be really hard to break through. So if you find what I'm talking about in this episode to really strike a chord with you and to really connect with the place that you're at right now, I'd love for you to check out a link that I'll put in the description where you can watch an episode hosted by our trading psychology team. It's called a Fomo Friday episode and the topic of that episode is about a full hour long. It was literally on how to hold winners longer.

So it is very topical to this episode so I hope you guys check that out if you want to keep learning and if you really feel like what I'm talking about in this episode connects with you. So when I was getting started trading and let's I'll show you the whiteboard here. this was what my metrics looked like. My average winners were about 10 cents a share.

My average losers were about 20 cents a share. That meant just from A from statistical analysis I had to be right 66 of the time just in order to break even 66 of time to break even. Now if I switch back here to the charts or to the my screen share, you'll see that my accuracy over the last this is six years or so of trading is 68.8 percent. All right, So 68.8 percent.

Well, obviously I have been able to make some good profit there. I've got 11.7 million dollars in gross profit. And by the way, for those tuning in here for the first time, these are my audited state. This is an audit from my broker statement.

So this is real money. I started on January 1st 2017 with 583 dollars in my account. That's right there up on the top. 583.

By the end of 2021, I had turned that into 9.5 million dollars in gross profit. I'm now over 10 million in gross profit. I'm not saying that because I want you to think that my result is typical or that you'll achieve anything similar because there's no guarantee you will. I'm saying this because I want you to know the person you're learning from today is qualified and knows what the heck they're talking about.

But when I got started like a lot of beginner traders, I fell into this habit of having really small winners and big losers. And for me it was 100 emotional. The problem was I was afraid of losing. I didn't have a lot of money to risk, I couldn't afford loss and so when I would get in a trade as soon as I was up even just five cents a share, I would sell the whole thing.

I would take my profit. And that's why I ended up having an average of only 10 cents a share. winner. I would just take the profit as soon as I had it.

But then the problem was when I would get into a trade that was a loser, I would hold it. So if you looked at my average hold time, you would see that my average hold time on losers was longer. So you want to look at the time you're in a trade and what you'll notice from my actual metrics right here is that if we look at this, if we compare right here, we can do a comparison of uh, winners and losers. So this is just for the last few months, but you can see the average hold time for winning trades is four minutes.

Very short. These are day trades and the average hold time for losing trades is four minutes. The average Uh loss is nine cents. The average gain is nine cents.

So my profits and losses are one to one. So if you make a dollar on average and you lose a dollar on average, you only need to be right 50 of the time to break even. And so as long as I'm able to maintain 65 to 70 percent accuracy, I will be profitable with a one-to-one profit to loss ratio. Now I always strive to take trades that give me the potential to do better than one-to-one to risk maybe a hundred dollars to make 200.

But at the end of the day when all is said and done, especially because of scaling out of trades, I end up even on trade that gave me a full two to one or three to one with only about one to one average profit versus the loss. I can talk more about that in a second, but let's look back at these metrics. So the result here is, as long as you can maintain a very balanced profit loss ratio one-to-one ideally or positive over 50, accuracy will keep you in the green. And so this was, um, over a period of time where I took about 900 trades 634 were winners, 279 were losers, and I averaged in the 60s in terms of percentage of success During that period, it doesn't show the exact, but it's somewhere in that in that area, about 65.

So one of the problems that a lot of beginners have is this fear of loss, and I get it because I was there not that long ago. I remember that feeling and so this is. There's a couple of steps that I took to help me break this habit of big losers and small winners. So the first thing was by focusing on higher quality stocks stock selection and this sounds simple, but it really is so important because one of the things that I found is that when you get into the habit of taking a lot of trades which I sometimes did as I was getting started, I would everything that was on the high day scanner I would jump in it so I'd be jumping in everything and I would just say oh, I'm going to set tight, stop and try to take quick profit.

But I was chronically over trading and the problem with over trading is that because I had a very low sort of quality standard for what I was willing to trade, I ended up having a lot more losses so my accuracy was lower right. So if you know 100 trades, my accuracy was really only about 55 50 which is quite low. That's not quite enough. and because I was hitting so many losers enough of them, I was getting that slippage where a five cent stop would turn into a 15 or 20 cent or 30 cent loss.

And then another part of the problem was the hesitation. When you're in a losing trade, there's that tendency to hold and hope that's going to turn around. And the the reality there is that that's an emotional response. It's the fear of realizing that loss that causes you to hold.

A loss isn't a loss until you've pressed the sell button. In terms of sort of from an emotional standpoint, until you've pressed the sell button and you're out, there's still hope that it could turn around, maybe even turn into a winner. And so that causes a lot of traders to hold and hope. And that's a really bad habit.

Now, by focusing on higher quality trades and by trading less, I was able to improve my accuracy. That meant out of 100 trades, I was in fewer losers and I had fewer times where I got stuck with that really nasty slippage on the exit that turned a five cent stop into a 25 30 cent or bigger loser. So accuracy, focusing on high quality stocks then turned into accuracy. And this is actually it's kind of interesting and I'll show you on the whiteboard here.

So focus number one is on accuracy. So by accuracy and aka quality. So if you focus on high quality, this in turn leads directly into consistency. So then you start trading more consistently.

When you start trading more consistently, what happens, your profit loss ratio goes up. More consistency, More winners, fewer losses. Profit loss ratio goes up. Profit loss ratio goes up, and then profits increase, right? So then back to focusing on accuracy, You keep focusing on accuracy, focusing on quality.

This is the spot to start because this starts the cycle if you just focus, for instance, on on profits. If you try to focus on profits that doesn't really lead you anywhere, you get yourself stuck in this habit of oh, i just want to make more money and sometimes that can cause you to be reckless to take really high risk trades that have high reward potential. But you're not really thinking about thinking about risk. Now if you just focus on your profit loss ratio, that's again, kind of focusing on the numbers.

What you have to do is you have to focus on the action that you're going to take that will actually improve the profit loss ratio. And so for me, that's quality. focusing on quality, and then that goes right into improved accuracy that goes into consistency that feeds into profit loss ratio. And that's where you start this positive feedback loop.

And it's important to try to get yourself in that place because the inverse is where you have this negative feed feedback loop and you start having losses compound. They get bigger and bigger and bigger and bigger. And that's what we call snowballing. And it's happened to so many really good traders.

It's happened to more beginners than I could possibly count, but even happen to really season traders where they'll have one loss, they get emotional, they hold it too long, and then because they're frustrated that feeds right into the second trade and then an even higher risk trade hoping that that's going to redeem them, get them back into the green, and then now they're down twice their daily max loss and it can just start to snowball really quickly. So slowing down and going back to the very start of this cycle. Let's and regardless of where you're at, if you've had some huge losses, you're deep in the red. It is not too late to break that cycle and you can do it right now today by focusing on higher quality stocks by focusing on trading stocks on the front side of the move, not the back side of the move.

I'll put a link to the end of this video where we'll talk in more detail about avoiding false breakouts and trading more on the front side of the move versus the back side. But really, this is so important. So this was what happened to me. I started focusing on accuracy and I started focusing on high quality stocks.

And you know what? I went from trading 15 20 times a day to trading just three to four times a week. I was only trading three. basically trading you know, one once to maybe twice a day, one one to two trades per day, and I was trading less because I was focusing on higher quality setups, right? This is quality versus quantity. Now What ended up happening was my accuracy went up really quick.

It does. It didn't mean I didn't still have losers. I did still have losers, but with higher accuracy. You know what also went up my confidence.

My confidence started to go up. I started to feel more confident. I felt like I was in the driver's seat. I felt like I knew what I was doing and when I had those losses, rather than feeling fearful and holding and hoping I would cut it immediately, I would let it go because I was confident.

I knew that that trade didn't work. I knew that the best trades work immediately and the worst ones fail immediately and ones that go sideways, breakout or bailout so I would have the confidence to break up with the stock. This is important. I would just let it go and then move on to the next one.

So I've gotten ruthless about breaking up with stocks. I just say, nope. You're done. I'm I'm over you.

I just cancel it out. I press Ctrl Z and I hit the bid. Now I'll tell you it's a lot easier to do that with smaller share size. When you start trading with 15, 25, 35, 000 share positions, it's not as easy just to break up with a stock.

You're in a big position. You know if you just hit the bid, if you try to do a market order that market makers are going to abuse you. You're going to get terrible slippage because of the way the high frequency trading algorithm sees your order coming to the book, cuts in front of it, pulls their own orders, and allows you to get slippage on the way down. All right, those of you that don't know about how market makers work, I'll put another episode at the end of this episode here.

Another recommendation of a video on what those high frequency trading algorithms. What? Those institutional traders don't want you to know. But the fact is, if you trade with smaller share size, it is so much easier to just be ruthless. Cut it, hit the bid and be done with it.

And so if you can do that, you start to get yourself in a position where your losers become smaller and smaller and smaller. So one of the ways to break the cycle of big losers and small winners. Number one: Focus on quality, Focus on trading the front side of the move. All right, and I'll make a list here so you can keep track.

All right. So let's go to the whiteboard. So Number One Quality. Number two: Reduce size and you reduce size not forever, but just for this period of time.

Right now where you're trying to break the cycle. Number three: Cut losses immediately. All right now. Cutting losses immediately as soon as you bail out.

This is going to help you so much because you're not going to get into this habit of having to average down. So many of you have probably gotten in this habit of catching a big loss, averaging down and it gets bigger and bigger and bigger. And so one of the ways to avoid that is by cutting the loss immediately, being ruthless about it. Just cut the loss and let it go.

You don't hold in hope you just cut it and that's it. You're done. And so there's two ways. There's two mechanisms that you can use.

One is a live stop order when you're trading during regular trading hours, and the other when you're trading pre-market Or you just don't want live stock orders is to always have a bailout button and you just are ready to pound that button if the stock is not working. So hit the bailout button. All right. So we've got quality.

Reduce size, Cut losers instantly. Number four: Focus on scaling out. Okay, so this is another one that's really big. So one of the things that I started to do was because I knew I had this instinct to sell the whole thing.

I knew I had that instinct and a lot of times it actually served me well to take small winners. You know part of scalp trading is getting in, getting out, getting in, getting out small winners. But I said what if instead of selling the whole position, I sell half and I hold the rest with a stop at breakeven. So let's say I buy a thousand shares All right, or 2 000 shares.

Let's say, I buy 2 000 shares. The stock goes up 10 cents. I'm up 200 bucks dollars. That's fifty thousand dollars a year if I was doing it consistently 200 a day.

So let's say instead of selling the whole thing, I sell half, I take half off the table. I pay myself a hundred bucks. now. I set my stop at break even on the balance.

If it comes back down and stops me out flat, I still walk away with a hundred dollars in my pocket. If it keeps going up. when it goes up to 25 cents to 30 cents to 40 cents, I sell another half. That instinct to take the whole thing off the table.

It's a button. And so I had the habit of pressing that button and taking the whole thing off. But now I've changed that button to sell half. So first, the first time it hits, I'm up 10 cents.

I sell half Instead of the whole thing. It goes up a little bit higher. So now I'm still holding 1000 shares. I sell half again.

So that's 500.. it goes up a little higher. I sell another half. That's half of 500 is 250.

And I keep scaling up slowly as it goes higher. That allows me to keep a little skin in the game. And there are times where I've actually made more on my scale out than I made on the initial position. But the initial position covered the risk of taking the trade right.

Because when I first got in with 2 000 shares, I was risking 10 cents 200 bucks. So once I get in, I take half off the table and I set my stop to break. Even now, my risk basically on the remaining position is zero and I'm able to hold it and see if this trade is actually going to work out the way I thought it would. Now, if it works out great, it squeezes way up, you know, all the way up to whatever it is, then if it gives you a brand new setup, that's fine.

if it meets your quality standard, if it's still the front side of the move, then you could take another trade up in that area. One of the things that I focus on a lot my first couple trades. The only goal is, you know, have a good trade and get green. If I go red on my first couple trades, I'm immediately giving back profit from the previous day.

That's a problem. So I start each day by focusing on the highest quality trade that can get me in the green. Once I'm in the green, my first target is hitting my daily goal. Now, until I've hit my daily goal, I've got to be really cautious.

I can't be aggressive. I can't take a lot of risk, so usually I kind of chip my way up to the daily goal and I can usually get there in three to four trades, three to four good trades. Now, once I hit the daily goal, if the day is feeling good, that's when I say all right now, I can work a little bit more to try to squeeze as much as I can out Of this day, I'm already seeing some good momentum. The winners are working.

I've already got my daily goal, so let's say I'm 75 over the daily goal. Now the next trade I can take 75 dollars of risk, set the stop, and let it work, and I don't have to scale out the whole thing right away or or take half right away because I already hit my daily goal. So what I try to do is I say okay, I've got the daily goal. Let's put that aside and now let's start over with basically the small amount and I could just let it roll.

And then when we have really good momentum, those days can sometimes compound into some of the biggest green days I've ever had. I first focus on getting green, then to the daily goal, and then once I have a little bit of cushion over the daily goal. That's the cushion I use to leverage the rest of the day because I've already gotten what I needed. But what I want to make really sure of is that I don't give back what I've already locked up.

So on the future trades. As I go further into the day, I have to be thinking, okay, my daily goal is x I've got 100 over the daily goal. I can only risk 100 on these next trades as I keep building up my cushion. You know, if I get 300 over the daily goal, then maybe I could risk 300.

But until I've gotten the daily goal, I have to be conservative and once I've got the daily goal, I have to make sure I don't give it back. And that means continuing that philosophy of cutting losses ruthlessly, just letting them go, they're done and winners scaling out again, scaling out slowly. But if I start to have my daily cushion, letting them roll a little bit more so this is what I would do if I was a beginner trader right now. Starting over, I would say focus on quality, reduce share size.

and this is especially for traders that are trading with like you know, 5 to 10. Fifteen thousand share positions go back to one to two thousand shares. small size. Some people one to two thousand is already going to be big size.

You may need to go down to like 500 shares or 100 shares. whatever. That number is where you can cut losses immediately and not have an emotional reaction. You can just press the sell button and where you don't get slippage and then number four focus on scaling out.

That allows you therefore to keep a little piece in. So if this stock does end up doing a really making a really nice move, you don't get Fomo. You feel like I did a good job. I got green.

you know I scale. Okay, so I took half off the table but I got more as it continued to move higher. and then if it sets up another really good pattern, you can get back in for the next one. I hope you really enjoyed this episode.

and if you did, there's a link right down in the description where you can watch a longer episode on this same topic hosted by Ted and Diane. They run the trading psychology team here at Warrior Trading, so if you want to hear from someone who knows a lot about trader mindset, how to get into the right headspace, and how to break through these mental walls that lead a lot of traders to sell winners way too soon and to hold losers too long, make sure you check out that episode. I think you will really enjoy it all right now. I'll put a link here, uh, to a couple other episodes right here on Youtube that you guys can also check out, so keep watching.

I hope you're subscribed the channel and I'll see you right here for the next episode on Youtube.