exiting a position in Forex

[Nelya]

Hello, forex profi-traders,

Just wondering whether you can share experiences how you exit profitable positions on Forex.
I have designed a system that works well in a flat market, but still can not find out how I should exit a profitable a position- what I mean- I need a definite and sharp rule that would make my system fully automatic. The system is designed for daily EUR/USD. Thank you
Nelya

 

[sinimini]

Alright Neyla, a 'definitve and sharp rule' is in my opinion too ridgid a way of approaching your exits because as Gammajammer says the market will do what the market wants to do.
Every trade is different so remember why you go into a position, and dont hesistate when you see something you dont like. You only need one sign for an exit. This could be the approach or test of a resis level, a round number, a fib level, a top heavy market and signs of slowing or something like a moving average. The GU for example will sometimes stop still for a minute or look like its stalling on a 5 min chart, but experience will tell you that its probably about to shoot up big time. So there are exceptions that you will learn to recognise.

My $0.02,

Sini.

 

[FXSCALPER2]

The trick is to be sophisticated with your analysis but crude with your trading.

 

[AgentZ86]

RE:Exits automatically

Hello, forex profi-traders,

Just wondering whether you can share experiences how you exit profitable positions on Forex.
I have designed a system that works well in a flat market, but still can not find out how I should exit a profitable a position- what I mean- I need a definite and sharp rule that would make my system fully automatic. The system is designed for daily EUR/USD. Thank you
Nelya

This is a broad topic, but I'll try to answer with the information you have provided.

First since you mentioned that your system works well in a flat market, I would suspect that an exit at the high or low of the ranges aka support / resistance would be best.However, a set profit could be ok if you can back test your system to see how the various profit levels would reveal what profit level would yield the most positive gains during backtesting. This would at least give you some idea of what direction to work on.
Assuming your system is mechanical as you mentioned you wish to make it automatic, so then backtesting with a charting platform that will allow you to backtest your system would be the first course of action.
Second the Sharp rule would depend on the results of backtesting your various profit target points.
Depending on your system, lets say you try a 20 pips target vs a 40pip target and see the backtesting results of which yields the most pipeage per month etc.
Or perhaps a 40pips vs 60pips target could yield more or perhaps lose more, or can yield more gains then a 20 pip target, but be wrong more often etc. You have to get a picture of which is most profitable, then start to hash out the rule ?
As you can see this is a broad topic, and there are many variations to setting a sharp rule to exit for profits especially in a mechanical system that will trade automatically.
But I could say backtesting would be the best starting point of this subject.
Also the target pips could also be irrelevant and you could exit on a indicator signal as well ? such as a cross of the CCI or some other type of indicator. There are too many varations to just suggest, X as a sharp rule or Y as a sharp rule

Anyhow I hope this helps,

 

[Nelya]

Exiting a position

This is a broad topic, but I'll try to answer with the information you have provided.

First since you mentioned that your system works well in a flat market, I would suspect that an exit at the high or low of the ranges aka support / resistance would be best.However, a set profit could be ok if you can back test your system to see how the various profit levels would reveal what profit level would yield the most positive gains during backtesting. This would at least give you some idea of what direction to work on.
Assuming your system is mechanical as you mentioned you wish to make it automatic, so then backtesting with a charting platform that will allow you to backtest your system would be the first course of action.
Second the Sharp rule would depend on the results of backtesting your various profit target points.
Depending on your system, lets say you try a 20 pips target vs a 40pip target and see the backtesting results of which yields the most pipeage per month etc.
Or perhaps a 40pips vs 60pips target could yield more or perhaps lose more, or can yield more gains then a 20 pip target, but be wrong more often etc. You have to get a picture of which is most profitable, then start to hash out the rule ?
As you can see this is a broad topic, and there are many variations to setting a sharp rule to exit for profits especially in a mechanical system that will trade automatically.
But I could say backtesting would be the best starting point of this subject.
Also the target pips could also be irrelevant and you could exit on a indicator signal as well ? such as a cross of the CCI or some other type of indicator. There are too many varations to just suggest, X as a sharp rule or Y as a sharp rule

Anyhow I hope this helps,

Thank you very much for the valuable response. I have realized that using an indicator signal is better than a set profit target, because in most cases one stop-loss hit by the increased volatility can cover three profitable trades, however, the Stochastic (8,3,3) that I have tested is lagging and shows an exit a bit too late. You mentioned the CCI indicator. What is that? Thank you very much

Nelya

 

[AgentZ86]

CCI exits

Thank you very much for the valuable response. I have realized that using an indicator signal is better than a set profit target, because in most cases one stop-loss hit by the increased volatility can cover three profitable trades, however, the Stochastic (8,3,3) that I have tested is lagging and shows an exit a bit too late. You mentioned the CCI indicator. What is that? Thank you very much

Nelya

Well the CCI aka (commodity channel index)
I clipped this from the MGfinancial charting indicator description just FYI
And there are a few different ways to use this indicator as with all indicators.

CCI focused on movements above +100 and below -100 to generate buy and sell signals. Based on the statistical fact that 70 to 80 percent of the CCI values are between +100 and -100, a buy or sell signal will happen less than 20 to 30 percent of the time. When the CCI moves above +100, a security is considered to be entering into a strong uptrend and a buy signal is given. The position should be closed when the CCI moves back below +100. When the CCI moves below -100, the currency rate is considered to be in a strong downtrend and a sell signal is given. The position should be closed when the CCI moves back above -100. As always, divergence in the oversold/overbought areas is considered as a good trading opportunity.

This might be something you could use for your exit point, or also perhaps Williams % indicator is ok too for flat market in my opinion, I've never had much luck with CCI in trending markets as the description would indicate, I've had better trades with CCI in flat market on the 4hr and 1hr charts in my opinion.
Anyhow hope this helps.