Entry and Exit points

grubs50

Well-known member
I was reading the CT manual thread on this website and a common theme seemed to be that it provides a good entry point but not so good exit point...........i find this a bit confusing since i have always thought that decisions about the exit point r totally down to the individual trader not the system implying that a good system should basically provide a good entry point............I hope someone would enlighten me , thanks
 

Grey1

Senior member
grub,

Exit is the most difficult issue in trading ..

one can exit based on the following techniques

1) Money management
2) technical,
3) Statistical

The external random comets from outside such as ANTRAX warning , SEP11, ...(upgrades,takeovers news and stuff like that are already in the price .. ) makes EXIT an event driven subject which will override both above techniques..


I have always been a poor exit man, and have always taken profit far too early.

Perhaps other traders can shed light on this subject
 

grubs50

Well-known member
but isn't it better to take a small profit and live to fight again instead of waiting and waiting for the big one and get wiped out in the process? That's y i'm surprised when ppl say that a system has a bad exit point.
 

theknifemac

Well-known member
grubs50 said:
.... i have always thought that decisions about the exit point r totally down to the individual trader not the system implying that a good system should basically provide a good entry point....

In my opinion the quote above sums up the problem with many systems / literature - there is little discussion about the exit to use and 95% of the effort is concentrated on the entry. Am currently reading Sweeney's Campaign Trading, while dull this does have some interesting thoughts on Max Adverse Excursion and Min Favourable Excursion for setting stops.

Cheers

Mac
 

Glenn

Experienced member
"I have always been a poor exit man, and have always taken profit far too early."

Wasn't it Rothschild who said something similar ?
"I made my money by exiting too soon"
:)
Glenn
 

grubs50

Well-known member
many little 'profits' earned by exiting early would, in the long run, to be better than waiting 4 the big one and getting closed out most of the time.
 

Trader333

Moderator
That would require a very high strike rate and I still dont know of anyone getting much above the 50% strike rate on successful trades and most less than that but please enligten me ?


Paul
 

grubs50

Well-known member
This is based on a good entry obviously!! . I have noticed that this is possible with indices esp the Dow if u actually get to know d 'character' of d index.
 
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fudgestain

Well-known member
Entry: if you have not done your homework extensively so that you are entering via set-up circumstances giving a high probability outcome, how can you plan or intend to make good exits?

Summary: if in the first place you don't whether you are on your a*** or your elbow when the market has moved for or against you, you can't have satisfactory exits .. or consistently satisfactory exits. Period.
 

Grey1

Senior member
theknifemac,

I have looked into Max Adverse excursion , maximum fav. Excursion as well other tools such as efficiency analysis as part of my research project around 1999 ish , to add or close positions in a way not to miss the meat in the trend.. ( assuming the trend lasted long enough to be profitable)....Ihowever had a little success to come up with a conclusive result to make the whole exit strategy worth while even though on back tested result I did come up with some fascinating results..In search of perfect exit , I ended up giving back the original profit I made because of my well calculated entry. I now strongly feel, EXIT is the most difficult part of trading and is constantly influenced by random forces from outside till the market is closed and one can't see the EXIT point while in a trade.. Inmy previous posts on risk analysis i have used Monte carlo simulations to show a minimum reward/risk of 3 is a good exit point ( with low edge systems) but as I said that is only based on theoretical bases than practical and real time trading ..
Math is good but not sure if the current level of Maths can model the social systems such as Stock market..
 

theknifemac

Well-known member
Grey1

Some interesting points there. I liked the ideas proposed by Sweeney, but as I am interested in trading stocks think it would be even more difficult to apply as would need to decide all these things on a stock by stock level. I can imagine what you meant about getting fascinating but ultimately useless results from your research.

I am about to embark on my own research program. I have been reading many financial books and been working on my infrastructure for some time. The Sweeney book is one I have meant to read for a while and as is so typical after the build up it did disappoint me somewhat.

While taking this thread off topic, lets go completely AWOL. I've also been following your posts on the trading for a living board re VWAP. In my day job, VWAP is often the target my traders want to achieve as their portfolio benchmark and in the past I have written a system to automatically trade a portfolio in line with VWAP. From what I can tell, you are using VWAP as an indication of almost fair value for the stock intra day ? Or am I missing the point.

Cheers

Mac

PS If this question causes aggro I can repost or move it to the relevant board, but its been a long day in a long week and I've just been told I am in NY next week so I really can't be bothered right now. :devilish:
 

Grey1

Senior member
The knifemac,

VWAP is the price given by average trader on any given day. This is the bench market for my risk analysis.. During every trading day my scanner calculates how far a certain stock is away from its vwap and if the deviation exceeds than that of 2SD.. If it idid exceed and the market was bullish then I would leave that stock alone ( too much selling pressure ) how ever if the stock started bouncing off of 2SD support line then statistically there is a 95% chance of reversal to its vwap ) ..

In 2001 I got involved in VWAP research with another good friend of mine on another BB called Technical trader but we did not use the whole concept correctly which as a result I lost all interest in such a system . Now adays VWAP trading is the core of my entry and as a result I have not had many losses..

I only use price and volume action in multiple time frames ( 30 tick and 1 minutes ) hand in hand with VWAP concept with no reference to any other TA tools..
 

theknifemac

Well-known member
Grey1

OK this is making more sense - you are comparing a stocks current price to VWAP, but how are you working out your standard deviation figure, are you doing some sampling during the day or using VWAP figures from previous days ? Ooops have reread the last part of your post again and see the answer to my question. You must be very dependent on a good tick by tick feed.

Sorry if I am prying too much into your method, but would love to know some more without you revealing the family silver. Now I think about this more, I want to study how intra day VWAP behaves against the market prices, so need to fire up my Bloomy tomorrow I think.

Mac
 

grubs50

Well-known member
what about moving the stop order to lock in the profits gradually? or is this too much of a simplistic approach to exiting a trade and trying to maximising profit at the same time?.
 

zarif

Active member
Look at my thread on
www.moneyam.com
the dow index thread
all you ideas and posts are welcome

my stop loss ideas and £/pt is as flws:

(capital x 5%) divided by stop pts = £stake

rgds
zarif
 

fudgestain

Well-known member
"This is based on a good entry obviously!! . I have noticed that this is possible with indices esp the Dow if u actually get to 'character' of d index." Grubs50
You've crossed on to the trail here.

Exit: assuming you know enough about your market, targeted profit-taking can be nicely deployed along with the trailing stop you suggest.

I don't keep such stops close behind the price if intending to catch a higher exit number.. could take me out too soon. Also I may instead be using an alert as a stopping out reminder so that my stop is not pre-entered and can't be hunted down by the broker.
 
 
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