The exit of a trade: how? when? where?

[firewalker99]

fire
Anyway, a way to reduce the risk is to exit positions once specific targets are reached rather than relying wholly on judgement of the market action. For example, analysis of your successful trades will establish a reasonable average of the profit expectation of the move (not the trade) - for argument's sake let's say that comes out at 30 points.

I prefer not to rely on market action for exiting a trade. However in some cases, the market is very clearly going in one direction and not going to look back. I'm thinking of a clear breakout of an important resistance level, or when price opens with a breakaway gap. Both are high probability scenarios where price can travel significantly further than considered normal. In those cases exiting the trade on "the reasonable average of the profit expectation of the move" will most likely be too early.

If I'm right you are refering to the "maximum favourable excursion"? I haven't found much information to study about that subject. If anybody has something to add on this subject, please do. I've only come across one book that goes discussies the topic more or less in depth:

http://www.amazon.com/Maximum-Adver...3426502?ie=UTF8&s=books&qid=1180388290&sr=8-1

Barjon, I was wondering if it would be much trouble to setup a poll.
Something like this:

What is your favourite entry/exit strategy:
1) Entry with whole of your position and exiting everything at once
2) Entry with whole of your position and scaling out at fixed targets
3) Entry with whole of your position and scaling out when you feel the market is about to turn
4) Scaling in at different price levels and exiting everything at once
5) Scaling in at different price levels and scaling out at fixed targets
6) Scaling in at different price levels and scaling out when you feel the market is about to turn
​

 

[barjon]

...............Barjon, I was wondering if it would be much trouble to setup a poll.
Something like this:

What is your favourite entry/exit strategy:
1) Entry with whole of your position and exiting everything at once
2) Entry with whole of your position and scaling out at fixed targets
3) Entry with whole of your position and scaling out when you feel the market is about to turn
4) Scaling in at different price levels and exiting everything at once
5) Scaling in at different price levels and scaling out at fixed targets
6) Scaling in at different price levels and scaling out when you feel the market is about to turn
​

....................

fire,

will have a go,but not 'til tomorrow night or wednesday.

cheers

jon

 

[firewalker99]

fire,
will have a go,but not 'til tomorrow night or wednesday.
cheers
jon

Thanks barjon.

I'd like to make this thread a sort of collection of information about exits of trades.
Anybody who has an article or other thread is welcome to post the link.

Article:
http://www.trade2win.com/knowledge/articles/general_articles/money-management-techniques/

Thread: Money Management Position-Sizing Plan
http://www.trade2win.com/boards/showthread.php?t=24437

Thread: Implementing Money Management Techniques
http://www.trade2win.com/boards/showthread.php?t=19295

 

[barjon]

fire

ok - I've set a poll which I had to truncate a bit to fit. I hope it catches the sense of what you said - if not I'll amend.

cheers

jon

 

[firewalker99]

fire

ok - I've set a poll which I had to truncate a bit to fit. I hope it catches the sense of what you said - if not I'll amend.

cheers

jon

Thanks!

Now let's vote guys

 

[laptop1]

Based on hypothetical trades on 4 lots hypothetical stops 20

Buy 2 lots at market stop 20 points

it moves higher, buy 2 more. place stop on your original 20 point stop.

You are now long 4 lots

sell 1 lot at 7 points "based on the average entry price", move stop to 10 points

sell 2 lots at 14 points "based on the average entry price,move stop to break-even

sell 1 lot at higher price, ride it as far as it can go.

If you wrong immediately on entry you will only lose on 2 lots. when you are correct on the move you be correct on 4 lots.

You can fine tune the above parameters.

 

[lurkerlurker]

Firewalker, I've voted "scaling in, single exit". I've now annotated the charts you so generously prodived, and found that my best results come when I add to my position size on confirmation, and then cover the entire position at what I believe to be the best price.

You can see for example that the method of using half stake initially, then doubling it on confirmation works quite well for me, especially during times when the initial entry is premature or not at the best price.

Excellent thread by the way. Quite advanced, and a lot of it doesn't apply to me now I am back to £1pp, but I am finding the theory useful. Good contribution to these boards.

 

[firewalker99]

Based on hypothetical trades on 4 lots hypothetical stops 20

Buy 2 lots at market stop 20 points

it moves higher, buy 2 more. place stop on your original 20 point stop.

You are now long 4 lots

If you wrong immediately on entry you will only lose on 2 lots. when you are correct on the move you be correct on 4 lots.

You can fine tune the above parameters.

Good example. One question though: you say if you are wrong on entry you will lose only 2 lots. Correct. And if you correct on the complete move you will be correct on all 4 lots. Correct too.

But, it looks to me like you are leaving out the "bad luck scenario" where you enter 2 lots at the original price. You then buy 2 more (suppose that is after the market has moved 10 points in your direction) and place stop on your original 20 point stop. At that point you are risking 2 x 20 points (first half) + 2 x 30 points (second entry) = 100 points. If the market decides to reverse just after you added to your position and aims straight for your stop you'd be losing a lot more then otherwise, not?

 

[barjon]

In my case, I'm more concerned with profit dwindling away on trades that move in my direction than entry tactics. So, I enter single position then close 50% at 1:1 and adjust stop on the remainder to breakeven and trail it. Mathemeticians may calculate that this is not the best way, but it suits me.

I treat continuation entries as separate trades rather than a scaling up of the first position (if you see what I mean ).

good trading

jon

 

[wasp]

Interesting stuff. Amazing how many different ways of exiting positions.

Before I started running my journal I played around with nearly all the above and couldn't find quite what I wanted for the most consistent exit strategy. After hours upon hours of looking, I started noticing that the tops of candles (but not the wicks) made good levels for placing S/R lines and placing trailing stops behind so. This meant that range or trend, the criteria was the same yet incorporating price action into the trailing reasons.

9/10 when my market of choice retraces back to the stop, it has reached its highs/lows and readies itself for range play or a reversal. I particularly like the way it removes all questions from the trader (me)! so as no mistakes can be made.

It works for me! :cheesy:

 

[ITT]

Wasp,

I've had a look at your chart but am not quite clear on what you mean/doing.

Are you able to explain slightly further?

(I've made some similar observations but not sure how best to make use of them yet).

An interesting thread and thanks to all contributors. (esp FW for starting),

ITT.

 

[wasp]

Trailing S/R

Okay, take a look at this.

Lets say you went long (for whatever reason) with the arrow at the bottom.

Now look at points I, II and III.

The first 2, when price crossed over and printed the next candle over the S/R lines, it didn't come back through (retrace) at all and thus allowing a nice tight stop and leaving the position open.

On III, the price crossed, printed above and then retraced back through thus iit would have hit the stop and it was close to the top of the move.

HTH

wasp


PS I'm sorry but its hard to write freehand in MSPaint, alright!

 

[firewalker99]

In my case, I'm more concerned with profit dwindling away on trades that move in my direction than entry tactics. So, I enter single position then close 50% at 1:1 and adjust stop on the remainder to breakeven and trail it. Mathemeticians may calculate that this is not the best way, but it suits me.

Risk:reward 1:1? You have a pretty high win ratio then I presume?
I don't know if that's the best way or not, I think it depends on the percentage of trades that return to breakeven. Also, it you trail the remainder of your position, how far do some trades on average go compared to the first exit (3 times as far, 5 times as far...?)

I treat continuation entries as separate trades rather than a scaling up of the first position (if you see what I mean ).

Not sure what you mean, so you have a setup you exited 50% and are trailing the other 50%. You have a continuation entry which you now take but only with 50% of the normal position, am I correct? That way you don't scale up.

 

[barjon]

Risk:reward 1:1? You have a pretty high win ratio then I presume?
I don't know if that's the best way or not, I think it depends on the percentage of trades that return to breakeven. Also, it you trail the remainder of your position, how far do some trades on average go compared to the first exit (3 times as far, 5 times as far...?)



Not sure what you mean, so you have a setup you exited 50% and are trailing the other 50%. You have a continuation entry which you now take but only with 50% of the normal position, am I correct? That way you don't scale up.

fire,

over 60% - an average for the remaining position would be pretty meaningless (look at the swingin' the ftse thread for example)

No, it's perhaps wrong to call them continuation entries since they are regarded as new "full position" trades in their own right even though I might have a residual position running from an earlier entry (see swingin' ftse again).

good trading

jon

 

[firewalker99]

Before I started running my journal I played around with nearly all the above and couldn't find quite what I wanted for the most consistent exit strategy. After hours upon hours of looking, I started noticing that the tops of candles (but not the wicks) made good levels for placing S/R lines and placing trailing stops behind so. This meant that range or trend, the criteria was the same yet incorporating price action into the trailing reasons.

Thanks for another fine contribution to this thread.

The tops of the bodies of the candles are often a good indication of where the buying/selling pressure starts to come in. I've drawn a couple of red circles on your chart and in a lot of cases (if not all) none of the candles will cross that little horizontal line of yours. The wicks might go above or below the line, but as each bar closes it comes to below the line. Exactly why this can be potential support & resistance. Good post

 

[Splitlink]

Thanks for another fine contribution to this thread.

The tops of the bodies of the candles are often a good indication of where the buying/selling pressure starts to come in. I've drawn a couple of red circles on your chart and in a lot of cases (if not all) none of the candles will cross that little horizontal line of yours. The wicks might go above or below the line, but as each bar closes it comes to below the line. Exactly why this can be potential support & resistance. Good post

I tried something like that, perhaps I was too impatient. 60% success rate---- My trouble is that I get the other 40% first! I'll try it again. The trouble with shares is that there are so many and I'm a bit of a butterfly with them. Do you stay with the same half dozen?

Split

 

[firewalker99]

I tried something like that, perhaps I was too impatient. 60% success rate---- My trouble is that I get the other 40% first! I'll try it again. The trouble with shares is that there are so many and I'm a bit of a butterfly with them. Do you stay with the same half dozen?

Split

60% success rate would already be quite good. The higher the timeframe the better it works in my experience. Not sure about the second part of your question though... shares? err.. I trade only futures.

 

[firewalker99]

Another example

Look at the wicks... this is on news...

 

[Splitlink]

err.. I trade only futures.

Right. I can see that you do not have so much trouble with choice

 

[Dinos]

FW, your aware of my trading style, I'm just playing with another indicator to get earlier entry points and need to test it first, I'll then add to this thread.

Good work, by the way