Regrets, I have a few.....

[barjon]

I have been trading (amateur) since the dark ages and I've never varied my strategy - potential trend continuation after retracement - albeit that I've used many different entry set-ups over the years. In fact, I'd say most of my thinking was devoted to such set-ups and very little to exits.

How I wish now that I had reversed that thinking since, whilst a good entry is important, it's knowing when to exit that is crucial to the bottom line.

Stop-losses have never been a problem. I hate seeing a losing trade in my account and ditch them without compunction (I do think a re-entry set-up is worth establishing, though, to cover those odd irritations of the damn thing turning round and zooming off in the direction you wanted in the first place).

No, the real problem over the years has been taking profits. I've done it all: watching healthy profits come back to break even trades; taking profits and jumping off the train just before it picks up speed; being shaken out by what's going on in a lower time frame; or ignoring what my trading time frame is saying and staying in because the higher time frame still looks ok; etc;etc. You name a fault and I've been guilty of it.

Have I overcome the problem? Well, certainly I'm a lot better than I was and I am far more well prepared. In essence, I believe you can live with a single entry set-up, but that there should be several exit set-ups in your tool box and a well thought out re-entry strategy. Most of all, I now spend far more time planning my exits than I do my entries.

good trading

jon

 

[shadowninja]

Indeed. Once you have figured out the entry, you have to figure out the exit. But you also need to manage it, for instance, by deciding when to move the stop or when to consider bailing if the position isn't performing as expected.

 

[leovirgo]

Excellent post Jon. For that I dare say, you need a combination of multiple profit targets and partial exits that produce positive expectancy.

As a short term trader, I am aiming for 70-80% of daily ATR with a RR of 3:1.

 

[barjon]

shadow

yeah, I suppose managing the trade is what I mean. I'm pretty useless at reading price action so I have to rely on various patterns which give "protect" triggers or, in the ultimate, exit triggers. That's complicated by the fact that I don't believe the markets recognises lines on charts, except by accident, but does have important zones to guide you (but all that's another story I suppose )

good trading

jon

 

[barjon]

lv

Yes, but to some extent doing that's a bit of a comfort blanket. I was a bit surprised to find when reviewing trades that a single entry, single exit approach would have given a bit better return than the scale out approach that I'd been using. 'Course that probably says more about the "triggers" I've got than the approach itself!!

good trading

jon

 

[leovirgo]

lv

Yes, but to some extent doing that's a bit of a comfort blanket. I was a bit surprised to find when reviewing trades that a single entry, single exit approach would have given a bit better return than the scale out approach that I'd been using. 'Course that probably says more about the "triggers" I've got than the approach itself!!

good trading

jon

how do you 'estimate' your expectancy? how do you decide whether to exit all or leave some on the table?

 

[ha0dho]

Excellent post Jon. For that I dare say, you need a combination of multiple profit targets and partial exits that produce positive expectancy.

As a short term trader, I am aiming for 70-80% of daily ATR with a RR of 3:1.

I totaly agree the one thing that changed my trading was to start having two profit targets instead of one. When the first target is reached i close half the position and then move the stop to break even. More often than not the trade turns around and hits my stop at break even but sometimes I get a big move. I think its best to take profits when the markets offers them.

 

[barjon]

how do you 'estimate' your expectancy? how do you decide whether to exit all or leave some on the table?

lv

Well a picture is worth a thousand words

My initial target is the high before the retracement. I used to close half and run half here. Now I monitor (dropping to lower TF) as it approaches with the intention of exiting unless there are certain features apparent when I will let it run lifting my stop fairly nearby.

In this case I exited, then re-entered (I have a couple of set-ups for this) and exited after the 'orrible gap showed not the slightest inclination to close.

Overall, the trade(s) was worth 96 points which would have also turned out at 96 points on a close half run half basis.

good trading

jon

 

[intradaybill]

shadow

That's complicated by the fact that I don't believe the markets recognises lines on charts, except by accident,

jon

The market is all of us and if we think the 200-day SMA is an important level then it is an important level. It is not whether those lines are important, it is how many are looking at them that makes them important.

Some concepts are so trivial but at the same time hard to understand. I started looking at the markets from a totally different angle than before after reading the first chapter of the book Profitability and Systematic Trading (Michael Harris, Wiley). See if you can find a scanned copy of the first chapter. This book changed how I perceive trading and the methods I use in a drastic way.

 

[barjon]

hi intraday,

yes, it is all of us - including those who just think TA stands for Territorial Army and a chart is something that hangs at the bottom of your hospital bed. The primary markets are the equity markets and they are moved by money flow. If the public - who wouldn't know a 200 moving average if it bit them - throw money in then the institutions that receive it have got to buy whatever their charts are saying and prices rise.

good trading

jon