Recently (and perpetually), I've pondered about when to trade tight and when to give room. Yesterday I had 2 trades that were "right" on premise, and I gave them room, but when they started to finally develop in my direction I cut them short.*
I have 2 general thoughts on that:
1. It didn't behave right in the first place so I shouldn't trust it too much when it barely does the "right" thing (so take small loss/gain instead of giving room again). This is my prevailing mode.
2. Meir Barak who says, "I trust it will go up/down" based on the way the setup is supposed to play out. He sometimes eats it big on this, but sometimes when it shapes up again he'll double into it and rake it in.
How should I decide? In general, I'm taking a relativity view on it. If my long setup / calls isn't playing out especially when the market or other tickers are, it makes sense to me to play it tight. OTOH, if we're discussing it, it's already done "not what it should have" so how do I view it in comparison to others and ultimately... at what point should I continue to give it room and at what point should I tighten stops?
Obv, stops always need to be in logical places. I'm having a feeling like I want to try to give these more room even after I've already given them room. Ex: I let it go against me 20%, now it's only 5% against me and I'm tempted to cut it. Should I let it ride?
Ultimately, I guess it all depends on the climate of the market in that moment. I hate missing big winners, but I can't afford the big losers. So I guess that's my answer.. I have to cut the losers, even at the expense of the fomo.
*Looked at another way, I had the wrong entry. I should cut tightly and potentially reenter but never give room. This is the negative of a cash account. I can't always re-enter so I need to have protection but still play the odds.
