Best practices for determining when a move is exhausted

W

Worldcrusher

Anyone who has ever held a winning trade has at one time or another questioned whether or not they should stay with it or close it out and take their profits. There are many methods of trade management, such as scaling out and trailing stops, that help to address this important question.

However, in this forum, I am hoping that we can share technical analysis methods used successfully by traders to determine when a move is exhausted and a reversal pending. I am not asking anyone to give away an "edge." I am just hoping to establish a best practices sort of resource on this topic...

My observation for move exhaustion/reversals has been seller's tails that form consistently over several candlesticks (especially when it occurs after a protracted move with little retracement), arrival at a significant price level such as a balance cluster or fib line, divergence in the tick, volume and/or major indicators such as RSI, Stoch, or MacD, and/or a sudden spike in volume. Of course, the most desirable is when all of these things occur simultaneously.

I wish all of you continued success in your trading.

Thanks,
Daryl
 
No one know where is the top or bottom, they know after it happened.

There are ways you can take profit and protect yourself:

1) Use predetermine target
2) Support & Resistant
3) Trailing Stop
4) Time exit
5) If you don't feel right, get out.


I found (1) & (4) very helpful. It has helped me keeping the profit many time. I would rather than a loss than seeing a profitable trade turn into a loss.

Yes, some time after your took profit, stock goes higher, but that's not the point. The point is you get what you want.

You also have to take your own trading style into account. Everyone risk tolerant is different. Someone people will able to stick to stop once they enter into a trade, and only exist when they get stop out. For me, if I enter a trade, and it does not move in my favor within 2 or 3 days, I will exit. No reason let it hit your stop.
 
Quote from eveningtrader:

No one know where is the top or bottom, they know after it happened.

There are ways you can take profit and protect yourself:

1) Use predetermine target
2) Support & Resistant
3) Trailing Stop
4) Time exit
5) If you don't feel right, get out.


I found (1) & (4) very helpful. It has helped me keeping the profit many time. I would rather than a loss than seeing a profitable trade turn into a loss.

Yes, some time after your took profit, stock goes higher, but that's not the point. The point is you get what you want.

You also have to take your own trading style into account. Everyone risk tolerant is different. Someone people will able to stick to stop once they enter into a trade, and only exist when they get stop out. For me, if I enter a trade, and it does not move in my favor within 2 or 3 days, I will exit. No reason let it hit your stop.
More...

Eveningtrader,

Lots of good info, thank you for taking the time to post it. I couldn't agree more with your statement that "No one knows where is the top or bottom, they know after it happened." With that said, as technical analysts, we focus on the probabilities of a future movement. In the hopes of focusing on the technical analysis of a move's strength, as opposed to aspects of trade management, have you observed any kind of highly reliable technical signals to ascertain move exhaustion?

Sincerely,
Daryl
 
Quote from Worldcrusher:
Anyone who has ever held a winning trade has at one time or another questioned whether or not they should stay with it or close it out and take their profits. There are many methods of trade management, such as scaling out and trailing stops, that help to address this important question.
However, in this forum, I am hoping that we can share technical analysis methods used successfully by traders to determine when a move is exhausted and a reversal pending. I am not asking anyone to give away an "edge." I am just hoping to establish a best practices sort of resource on this topic...
My observation for move exhaustion/reversals has been seller's tails that form consistently over several candlesticks (especially when it occurs after a protracted move with little retracement), arrival at a significant price level such as a balance cluster or fib line, divergence in the tick, volume and/or major indicators such as RSI, Stoch, or MacD, and/or a sudden spike in volume. Of course, the most desirable is when all of these things occur simultaneously.
I wish all of you continued success in your trading.
Thanks,
Daryl
More...


Do an ET search on "FTT".
You will find many discussions.
 
Quote from margo_trader:

For me it's support and resistance.

T
http://actionpointsta.blogspot.com/
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Margo_trader,

At any given times there are a number of support and resistance levels. Could you get a bit more specific in how you differentiate the strong s/r from the weak? Do you require them to be substantiated in any way specifically? For example, does price have to hit the s/r level multiple times? Do you look for a certain period of consolidation? If level is penetrated without any interruption, is the level invalidated?

Thanks,
Daryl
 
Quote from Tums:

Do an ET search on "FTT".
You will find many discussions.
More...

Tums,

Thanks for the lead. I did a search as you suggested and I found many references to FTT. However, I was unable to find out what the acronoym stood for?

Thanks,
Daryl
 
Quote from Worldcrusher:

Thanks for the lead. I did a search as you suggested and I found many references to FTT. However, I was unable to find out what the acronoym stood for?
More...

FTT = Failure to Traverse

- Spydertrader
 
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