Quote from CashProfits:
You're telling me "knowing where to enter" isn't as important as making sure you exit a trade?
No, I'm saying it's not as important as knowing the right
place to exit your trade, whether it's a winner or a loser.
Which scenario would you think has the best chance of success:
(a) A great trader who knows how to trade, knows how to cut his losses, and knows how to take profits properly is paired up with a computer system that randomly kicks him into trades once an hour. Wherever the market is, the computer decides based on a 50% probability to go long or short (no analysis done at all), puts on the trade, and kicks it out to the trader to manage.
(b) The best setups in the world are given to a new trader who doesn't know how to cut his losses and doesn't know when to take profits properly. He holds on too long to losing positions hoping they come back, and takes profits too early when the price moves in his favor.
Now, who would you rather have managing your money given a choice between ONLY these two situations? No question it's (a). Situation (b) is a guaranteed loser, whereas the worst you will get with (a) is break-even. If a good trader is kicked into a bad position, he will immediately close it out because he knows how to EXIT. If he's kicked into a great position (say, with a major trend), he knows how to hold on and make money because he knows how and when to EXIT.
If you had a choice between random entries with great exits (option a) vs great entries with crappy/random exits (option b), no question the exits will be more important. That was my point.
The whole point of a good entry is to give a backbone to your exit in the first place.
Look, they're both important, and in reality we don't actually separate them. My point was that new traders look for great entries and then think that their work is done. They don't often even THINK half the time where they are going to exit. So they get into the trade, don't have a stop loss, and don't even know what their profit target is. That's the point that I was trying to make... everyone looks for great entries, but great traders know how to make proper exits.
Seeing as entering a trade is the first step of any trade, if you don't find it most important to enter a trade correctly in the first place then the whole theory of positive risk/reward goes out the window.
Depends on the instrument. With something like ES where it hardly moves and each tick is significant, the lost slippage of a bad entry will cost you. In crude oil it doesn't matter as much, because it moves so far relative to the slippage costs that you can be kicked into a number of bad trades and close them out for immediate losers without really killing your P/L, because that one winner will pay for a lot of small losses. But yes, entering a trade in the right spot is definitely important and I never suggested that anyone should use randomness as an entry technique.
I'm not saying that exiting isn't
important, it obviously is because it's the second half of what makes up risk/reward. All im saying is that without considering an entry important in the first place you're just giving the market more of an edge over you.
I never suggested that entries aren't important, or that you shouldn't work on them. I just suggested that exits are actually a little more important (as shown by the example in the top of this post), and that new traders almost never even consider where they should close their trades. That's all.
