Sunday Debate: entries and exits

[barjon]

Look around and you will find millions of words devoted to how and when to enter a trade, but precious few devoted to how and when to exit a trade. Any fool can enter, but it takes skill to exit to best advantage.

So, your topic for this week is:

A good entry is important, but a good exit is crucial

enjoy

jon

 

[shadowninja]

Any fool can exit but it takes skill to enter to best advantage?

 

[RockyRacoon]

Exiting too early with profit is better than exiting a losing trade too late.

 

[Splitlink]

Over the years, I have allowed the market to take back what I have taken from it, in the same trade.
In addition, I have advised, more than once, in leaving the original stop where it is, instead of moving it up, at least, to break even. I'm beginning to wonder whether I will, at this late stage, ever learn differently because, no matter how many times one gets stopped at breakeven, at least his account is intact for another trade. Sooner or later, if he is a good trader, one of the trades will keep going.

On the other hand, although I am a great believer in the logic of letting the winners run I find that so many times I get 16 points profit, only to allow the trade to close at a few points loss. Since this happens more times than I can count, it may be more profitable to take this "bread-and-butter" money instead of waiting for the big one. Whatever I do, I should make sure that some profit is locked in with a closer stop.

Many do say that they take 10 points and get out. I think that they could well be right over a longish period, rather than waiting for the profits to run.

 

[Splitlink]

Exiting too early with profit is better than exiting a losing trade too late.

The trick is to know what time is "too early".

Not taking your advice has held me back more than it should have.

I hope others take heed of your advice but I think that it is the difference between "income" and "riches".

 

[RockyRacoon]

The trick is to know what time is "too early".

Ha ha! So true!

All I know is I hate it when I close a trade for a loss that 5 minutes earlier was profitable.

So "early" must mean - whenever you have a profit.

 

[RockyRacoon]

I think the old saying: "cut losers, let winners run" creates far more losers than winners..........I still struggle to get that mentality out of my trades.

Who was the author of that evil saying anyway?

 

[Splitlink]

Any fool can exit but it takes skill to enter to best advantage?

Not so sure about the "any fool" bit. As I said, my entries are ok, but I'm inclined to think that they are so good that they won't go into loss. They can, and do, quite often.

Greed, I suppose.

 

[shadowninja]

I think the old saying: "cut losers, let winners run" creates far more losers than winners..........I still struggle to get that mentality out of my trades.

Who was the author of that evil saying anyway?

It may be more relevant to investing or position trading. Personally, I've found that you have to manage trades differently depending on why you entered a trade. The "why" is determined by many factors: timeframe, news events/data releases, the set up reason (candlestick pattern, chart pattern, indicators, price action), your trade direction in relation to the trend, etc.

 

[tomorton]

I think the old saying: "cut losers, let winners run" creates far more losers than winners..........I still struggle to get that mentality out of my trades.

Who was the author of that evil saying anyway?

Agreed. This is a saying that smacks far more of the investment market than trading. Should be superceded by the first law of business - Get the money in the bank.

 

[Splitlink]

Ha ha! So true!

All I know is I hate it when I close a trade for a loss that 5 minutes earlier was profitable.

So "early" must mean - whenever you have a profit.

My next problem is "A big profit" or "A little profit". ?

These are daft questions but it makes the difference between being a part of the minority winners or the majority losers.

Is it worth taking the trade for peanuts? I suppose that if the peanuts come in on a regular basis the answer is "Yes"

On Aug 4th I took 68 points on one trade. Since then, I have lost most of that gain in the kind of trades that I have mentioned ie. trades initially making 10-16 points but ending in a loss.

So much for being on holliday!

Perhaps a trailing stop is the answer but SB does not have that.

Reading my posts it can be seen that exits are a serious problem for me. All psychological, of course!

 

[RockyRacoon]

My next problem is "A big profit" or "A little profit". ?

These are daft questions but it makes the difference between being a part of the minority winners or the majority losers.

Is it worth taking the trade for peanuts? I suppose that if the peanuts come in on a regular basis the answer is "Yes"

On Aug 4th I took 68 points on one trade. Since then, I have lost most of that gain in the kind of trades that I have mentioned ie. trades initially making 10-16 points but ending in a loss.

So much for being on holliday!

Perhaps a trailing stop is the answer but SB does not have that.

Well, we can start a discussion about what one's definition of peanuts is ha ha!

I've been trading micros, trying to only trade for 1% - 3% of account size per session - - I probably averaged about 2% or 3% per trade for the last few months and have doubled my micro account with what I think are peanuts. Granted, I know it is only a micro account.

For me, exiting early based mainly on a "percentage of account" based goal most of the time is the way to go lol.

 

[bangkoker]

re post about SB not having trailing stops.

-
IG have trailing stops on there SB platform. It seems a good compromise, it is so hard to know when to take profits. Atleast by moving stop to b/e can not lose and a trail stop, sould enable bit piece of move before any retracement, I have a feeling taking profit and stops will be something I will struggle with for sometime, entry seems more logical.

 

[ibetyou]

The trouble is everyone is playing diffrent time frames,a scalper takes a profit as soon as he can see say 10 points.
A day trader is looking for a bit more say 30 point
A weekly trader is looking for 300 points.
And so the same it is with stops,the longer the time frame the bigger the stop.
I like to see a return of 4/1 on a trade.so if im going to have a 100 point stop im exspecting the market to move 400 points in my direction.
As for the exit i set a target as i know if it goes up 400 points it will have become over bought.
if it hits my target i'm happy if it carrys on up 200 points more i don't care as it would be so over bought it will be back soon.
As for taking a profit if it does not reach my target then my stop comes in to play,
I move it to the day befores low as if it makes a new low i want to be out of it.
Should it move say 200 points in a day but not reach my target by 50 points then i take it.
The target is only a guide.

 

[Jason101]

Perhaps a trailing stop is the answer but SB does not have that.

Some do as pointed out. But this would mean trailing a stop at a arbitrary number. If this thread is correct about the importance of the exit then why exit so randomly?

 

[Jason101]

That’s a funny thing, I am switching from this thread, to Microsoft Word, refining a trading plan and I have only just realised that all of the meat written on the plan is about exiting and managing and so far have only a couple of lines on entry.

 

[counter_violent]

If a trade is entered at point A and price moves in your direction to a point B ...it is not by chance that price is now at point B so you should remind yourself that it is there for a reason...don't be too hasty to take the profit.

 

[bbmac]

' A good entry is important, but a good exit is crucial '

No-one ever got sacked for booking profit is something I read years ago and there is probably truth in it. From the point of view that we don't get paid on entry, but we do exit, exits have to be more important than entry. Cut your losers, let your winners run, as an earlier poster to this thread reminded us in another well known trading trueism/adage and we all understand the logic and wisdom behind it. Having a positive expectancy over any given sample is important to overal long-term consistency/profitability but this is also allied to strike rate ( % of winners of total.)

From a personal point of view I worked so hard on developing a trading edge that had an absolutely clinical entry point with the max tech confluence and a great price action trigger, but I neglected to devote as much time to a similarly acute methodology for exits...as a consequence my trading style has evolved into that of booking profits early -for the most part,(what some may refer to as scalping,) as a result of this lack of methodology for exits. Whilst having a very high strike rate, my trading log screams at me that on most occassions I leave a lot of pips on the table but in order to pick those pips up I would have to scarifice some strike rate for an overal larger pip gain. So why not do that? Well sacrificing strike rate sounds seasy but haivng a high strike rate has some beneficial psychological effects not least in removing the fear of entry and long consecutive runs that can add to that as well as making it harder to hold the winners.

During the last 12months I began a collaberation with another trader who really made me think about exits in the same way as I had thought about entries and whilst I have made some progress I still find exits harder to pinpoint a methodology to in the same way as I did entries.

I therefore generally agree with the assertion; A good entry is important, but a good exit is crucial and I continue to work on a methodology for exits that suits my own tolerances. In so doing I have to retrain myself from the instant gratification that quickly booked profits provides as well as working on the negative corollary of a high strike rate methodology, ie that having such a high strike rate becomes an end itself making it's diminution difficult even for greater overal gain.

G/L

 

[Splitlink]

" Never let a profit turn into a loss" is another saying. That is something that I question, today, because it is a habit that loses me some good trades.

When a trade makes very good gains there is a case for taking a good profit, but I find that when the profit could be ie 15 points the market will try to take it back. When it goes back to, say, 7 points I press that button and close the trade because of the desire not to take a loss.

Basically, it is a question of not knowing when a trade has more potential and when it does not.

Still learning, but time is getting tight. Keeps me mentally fit, though!

 

[profit13]

plans are more important.