1-1 Coaching: Bob's Path To Letting Winners Ride

A technique used in Bob's coaching to overcome FOMO and Early Exits

Meet Bob, a futures day trader working at a prop firm, who was struggling with his execution. Over a period of five months, from January to May, I had the pleasure of coaching Bob and watching his progress.

The biggest struggle Bob had was his tendency to cut his winners too early, leaving a significant amount of profit on the table. His trades clearly had potential for bigger risk to rewards but, because of fear of missing out, he wasn’t able to hold the winners longer. Most of the time he would exit trades, telling himself he could reenter. But the truth was he would rarely do that; he was only using that thought as an excuse to satisfy his fear.

Also, Bob struggled with his approach to risk management. He was able to oversize when needed but he found it difficult to maintain that level of risk throughout the trade, leading him to then cut the winners short. It was all a cycle.

On top of this, Bob was trading for a prop firm, but he wasn’t using even half of the maximum daily risk allowance. In other words, he was trading with smaller positions than he could afford to.

Bob's struggle with early exits and risk management left him frustrated, knowing that he had potential for more but he just couldn’t materialize it.

Bob's coaching goals were as follows:

1. Improve the risk-to-reward ratio of his winning trades.

2. Extend the duration of his trades by holding onto winners longer.

3. Implement a more effective position-sizing method and utilize more risk when appropriate.

After five months of one-on-one guidance, Bob made significant progress. He managed to improve his risk-to-reward ratio, became more comfortable holding trades for longer periods, and overcame the pressure to take profits too early. He also learned to use higher risk in his trades.

Even during the slow market conditions we had at the beginning of 2023, Bob achieved top rankings in his prop firm for the months of February and March. We pass through a time when the adaptation of his strategy & performance was needed and Bob did it successfully.

In this article, I will go over two of the techniques we used in Bob’s coaching that allowed him to catch more of the moves and make more money on his winners.

Bob’s Journey

Exit Method

Bob was exiting his trades using one single profit-taking. This placed a lot of pressure on him to get the right exit. His trade management wasn’t flexible. Left with only one chance to take profits, he would get nervous and end up acting on his fear, leading him to close full position too early.

This exit approach wasn’t helping Bob. There were ways to make his exit method more flexible and put him on a higher probability side.

So we introduced a new approach to take profits by using partials.

The first step of Bob’s new exit approach was to scale out of his trades in two moments. When he would feel that the urge to fully close the trade was getting too big and difficult to handle, the idea was to satisfy that urge by taking one part of the position out. This 1st profit was based on emotions rather than technical indicators. This might sound weird but it was just the first step that would take us to where we wanted. It required Bob to be highly self-aware during his trading.

The second partial exit was meant to be taken after the first one, and we started by leaving at least 10-20% of the position. Since Bob was a discretionary trader, he could use his expertise to decide when to take the second partial. If only he could reduce his fear with the first partial, then the emotions would be easier to run the second one. His fear wouldn’t dictate his actions, allowing him to focus rationally on his fundamental variables to read the market properly.

There were possible challenges that Bob could face with this approach. We anticipated them and developed plans of action:

• Challenge One: The urge to take the full position out at the first partial profit. To overcome this challenge, we began with a significant percentage (70-80%) for the first partial. This ensured most of his profits were secured, allowing him to freely run the remaining partial risk-free, most of the time. Over time, we could adjust the percentages and set goals for taking a smaller percentage for the first partial and a larger one for the runner.

• Challenge Two: The urge to take the second partial immediately after the first one, resulting in two partial exits very close together. To address this, we established a rule that the second partial couldn't be taken less than 10 ticks away from the first one, on A setups. This rule ensured Bob gave all the discipline and focus to run the second partial.

I explained to Bob that in the beginning, this exit method wouldn’t improve his profits by much. The initial goal was to practice to catch more of the move. Then, with the adjustment in percentages for the 1st and 2nd partials and with practice, it would mean a big difference in the equity curve in the long term. In my coaching approach, I believe in taking small steps towards the ultimate goal. Many traders make the mistake of wanting to solve their problems right away, from 0 to 100, leading to frustration. By focusing on small and manageable milestones, the trader has space to achieve small victories that feed the motivation to pass on to the next step.

This was a work in progress and in the first week, the only goal was for Bob to be able to take the two partials on his winners, which he accomplished successfully.

Risk Management

As I mentioned earlier, Bob was using a significantly low amount of risk in his trades. To address this, we agreed to increase the risk in all of his trades, focusing particularly on his A+ setups, where he had the highest confidence to maximize profits. The interesting thing is that, by increasing the size of his trades, the 70-80% of the first partial profit would result in equal or even more profits compared to taking full size with his previous approach. This was a win-win. We began with small increments in increasing the risk, gradually moving close to the maximum daily risk allowance. We also used a method to simplify the position sizing and save calculations. With it, every time Bob would take a trade, he was confident about the size which would give him space to focus solely on the execution.

Bob gradually became comfortable taking two partial profits, which over time, he transformed into 3, 4, or more. This exit method took into consideration that every trade is different, and the market is uncertain. By using a more flexible exit method, we can adjust it to the different market conditions and actually improve the read of the market.

That’s what’s happened with Bob: he saw a significant improvement in his ability to read the red and green flags for the validity of his trades and with that, his confidence in riding them increased a lot.

Previously, a single red flag would press Bob to exit his trades fully. But we realized that many times, one red flag wasn’t decisive for the validity of the trade. Now, he had the confidence to keep a runner and take advantage of the market's potential. Because Bob had more control over his exits with this strategy, he could better practice his trade management skills meaning there was more potential for progress.

With this exit method, the market randomness was always taken into account because Bob was leaving runners in case of price would keep on going. This is how traders have home runs, by never closing themselves to what can happen in one trade.

What happened is that Bob experienced very good trades and some home runs which made him rank at the top in his prop firm for the months of February and March.

Final Words

After 5 months of coaching, Bob achieved great improvements in his trading performance. Through our work together, he was able to:

• Build a solid routine to collect and analyse data - the foundation;

• Reduce the fear of missing out and trade more comfortably;

• Increase his risk to reward and trade holding period;

• Use larger sizes on his trades without extra pressure because he knew he could scale out;

• Let go of the pressure to achieve a perfect exit and instead focus on long-term results.

We not only improved his performance but we did it during a rough period: the markets were slow and not showing really a clear direction. Bob’s trades wouldn’t work as before and there was a clear need to adapt to the market. Bob did that fast and very well.

Nothing of this would’ve been possible without the fearless commitment, rigorous discipline, openness, responsibility, and humbleness of Rob. He was willing to put in the effort and make the necessary changes.

If you are struggling with the performance of your strategy and constantly repeating the same mistakes, 1:1 coaching might be the right option for you. If you want to take the next step in your trading career and are committed to solving your performance flaws, feel free to reach out. You can connect me via email at theperceptivetrader@gmail.com.

With love,

Sara

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