Exit strategy

[nitro]

...Archangel summed it up well: the key to effective money management is setting up a number of scenarios where you simply can't lose, and can possibly end up with a very large profit if your market has a large continuing move. Worst case when these scenarios set up is that you take a small profit.

Tri,

No such thing as "can't loose" in trading. I "know" you meant "setting up a number of scenarios where your edge tells you that you have a high probability of having the trade go your way" ...

nitro

 

[TriPack]

Good point. Lack of liquidity can create situations like these but they are the exception and not the rule. Barring a low liquidity situation I'll take as many of the aforementioned scenarios as I can get.

 

[beginner66]

dead right real edge does involve an exit strategy as the signals and exits are dual in nature.

I think that if there were a holy grail it would involve the exit strategy. When you pick an entry point all you've speculated on is the direction of the price, and there are only two possibilities, up or down, long or short. The exit on the other hand has hundreds or thousands of possibilities, both for a stoploss and profit exit. Figuring out how to exit at the best price will minimize your losses and maximize your gains, and the ratio of the two determines your profitability.

 

[tomorton]

dead right real edge does involve an exit strategy as the signals and exits are dual in nature.

Yes, the exit tactics should be determined in advance, while the trade is being planned, in just the same way as the entry should be planned.

Some traders who actually do plan an exit make the error of stipulating the exit signal must be the converse of the entry signal.

 

[murray t turtle]

Yes, the exit tactics should be determined in advance, while the trade is being planned, in just the same way as the entry should be planned.

Some traders who actually do plan an exit make the error of stipulating the exit signal must be the converse of the entry signal.

%%
Or in some cases , like a paraphrase , Bill Fractal Williams noted ;
no exits or entry on lumber.[Lack of liquidity, CME contract ,2X4 softwood.....] Good points.
2] But some rich use 2X6, for more insulation capacity.
3+]And WY sector has plenty of liquidity on that same product;
+ plenty of related liquidity on the same product, HD millionaires.

 

[Innervoice]

Exit strategjes are the most overlooked parts of a trade.
Most wait too long to exit whether it goes the wrong way or if it moves in the right direction and they stay in too long and get greedy.
Selling correctly is what separates the successful from the unsuccessful.

 

[deaddog]

Exit strategjes are the most overlooked parts of a trade.
Most wait too long to exit whether it goes the wrong way or if it moves in the right direction and they stay in too long and get greedy.
Selling correctly is what separates the successful from the unsuccessful.

True!! Do you have any suggestions for selling correctly?

 

[Handle123]

MFE stands for Maximum Favorable Excursion. MFE marks the highest price during a long trade and the lowest price during a short trade.

Your backtesting then forward testing will define exit of profitable trade but I rather try to grab 90% of the "mean" average.

I have found through the decades, once trade gets to little better than breakeven stops, they stay that way till trade is reversed or closed out. Can stay that way many years and readjusted after rollovers dealing with futures.

 

[murray t turtle]

Exit strategjes are the most overlooked parts of a trade.
Most wait too long to exit whether it goes the wrong way or if it moves in the right direction and they stay in too long and get greedy.
Selling correctly is what separates the successful from the unsuccessful.

%%
Adding to the complexity\ a major trend change.
SHOOTING INDUSTRY MAGAzine noted all the gun sales, last couple of years big %% of women are buying.
Seldom sell any guns, but with the .38 special cop trades taking longer to sell / market is still good but the police dept only sells every now + then.
Stainless steel/ jumped even more/ brass about the same way , but different markets+ brass could easy get burned by holding to long.[Edit ; accidental play on words, burned brass/firepower+ fun market]