Exiting Positions

greenleaf · Jun 30, 2003

I am having a hard time adjusting my exits for the market. I've been doing very well picking stocks and predicting direction, where nearly all of my picks move in the way I want them to. The problem is exiting correctly.

Too many times lately, I have seen my profits erode. It really isn't a self-discipline thing because I am not afraid to close positions and have no attachment to the stocks (in fact, I trade off ticker symbols only and have no idea in many cases what the name of the company is, never mind the fundamentals). It's just a matter of whether my expectations are too high. I keep remembering all of these people and books who talk about letting profits run, but I am wondering if I should just take my $200-$300 and move on to the next trade instead of letting my $200-$300 turn into $50-$100.

Thanks for any advice,

Dickie Greenleaf

rttrader · Jun 30, 2003

GL -

What type of risk to reward ratio are you using? (3-1?, 6-1) their are several good idea's for proper risk management that you could implement. The topic has been talked about here on ET several times before, you could use the search button (upper right hand corner) and find quit a bit of information to help you.

Just my .02 cents worth....but it might help you set exit targets i.e. I'll risk .10 on a .30 profit etc....

rttrader -

zman7854 · Jun 30, 2003

taking profits??

Well Dickie I can say that I've been there plenty of times. The only thing I can say is that when I trade, each setup contains three essential elements they are: 1. Entry point 2. Stop loss 3. Target Do you trade with a trade with a target? (if no you should if yes then adhere to them and move on to the next trade. I take profits immediately as I do with my stops. In fact I lose more than I win BUT my risk/reward is always favorable, for instance, I never trade unless the reward is at least twice my risk (usually 3x or greater) therefore at the end of the year I always have positive. I can empathize with you completely though I have seen picks shoot up 10 or 15% in short time only to retrace back for a small 2% gain or breakeven. All this is part of the business bud. Hope my comments helped. Happy trading. Z.

greenleaf · Jun 30, 2003

Thanks for the replies.

I trade with a target. I have been buying pullbacks in strong uptrends (or shorting the opposite) and set my target for generally half of the distance back up. I set my initial stop for below the low of the day or the low of the previous day.

My account is only $15,000 so I can't currently daytrade, which is why part of me wants to hit a bunch of singles to get to $25,000+ and keep tight stops along the way. My account isn't big enough to survive many drawdowns with larger stops.

These are my assumptions... Obviously, I could have wrong assumptions.

I greatly appreciate any feedback. I feel this is one of my only weaknesses to overcome. My position sizing is based on volatility and I think is sound. It's just this profit taking thing I need to master.

-- DG

jack hershey · Jun 30, 2003

Quote from greenleaf:

Thanks for the replies.

I trade with a target. I have been buying pullbacks in strong uptrends (or shorting the opposite) and set my target for generally half of the distance back up. I set my initial stop for below the low of the day or the low of the previous day.

My account is only $15,000 so I can't currently daytrade, which is why part of me wants to hit a bunch of singles to get to $25,000+ and keep tight stops along the way. My account isn't big enough to survive many drawdowns with larger stops.

These are my assumptions... Obviously, I could have wrong assumptions.

I greatly appreciate any feedback. I feel this is one of my only weaknesses to overcome. My position sizing is based on volatility and I think is sound. It's just this profit taking thing I need to master.

-- DG

You are in a bad place. i think you should sort through the advice you are getting very thoroughly.

greenleaf · Jun 30, 2003

Quote from jack hershey:

You are in a bad place. i think you should sort through the advice you are getting very thoroughly.

Thanks... What do you mean exactly?

gms · Jun 30, 2003

Quote from greenleaf:

I am having a hard time adjusting my exits for the market.... set my target for generally half of the distance back up ...I keep remembering all of these people and books who talk about letting profits run, but I am wondering if I should just take my $200-$300 and move on to the next trade instead of letting my $200-$300 turn into $50-$100.

Setting a target of a half run up turns out to give up lots of profit, then maybe you just want to exit when you see that $200-300 profit hit, or scale out some, or ride the rest of the way with a trailing stop, or sell some-trail stop the rest? Pick one method... or a few.

easyguru · Jun 30, 2003

Quote from greenleaf:

I am having a hard time adjusting my exits for the market. I've been doing very well picking stocks and predicting direction, where nearly all of my picks move in the way I want them to. The problem is exiting correctly.

Too many times lately, I have seen my profits erode. It really isn't a self-discipline thing because I am not afraid to close positions and have no attachment to the stocks (in fact, I trade off ticker symbols only and have no idea in many cases what the name of the company is, never mind the fundamentals). It's just a matter of whether my expectations are too high. I keep remembering all of these people and books who talk about letting profits run, but I am wondering if I should just take my $200-$300 and move on to the next trade instead of letting my $200-$300 turn into $50-$100.

Thanks for any advice,

Dickie Greenleaf

1 it might be because the market momentum has declined and breakouts from pullback do not go far. which is what happens during consolidation or prior to trend change.
2 take partial profit it is on half position or 1/3 rd and then on the next portion and let a small portion run.
3 select stock with high momentum ( if you are swing trading pick up stocks which have pullback after a significant milestone e.g. stock pulling back after making a three year high or stock pulling back after making all time high.

PetaDollar · Jun 30, 2003

Exits are where it's at, so to speak.
One exercise i've been doing for a week now
(on a simulator, real time) is taking the same mechanical entry
signal every time, but take a discretionary exit. The mechanical system is an "always in system" so I compare how I do to the system.

lindq · Jun 30, 2003

Quote from greenleaf:

I have been buying pullbacks in strong uptrends (or shorting the opposite)
-- DG

My system is based on this strategy, and over the past three years I've experimented with various stops and limits. I suggest that you try selling at the close of the day that price hits 4%, and give yourself a much broader stop. Stocks in pullbacks need room to move, and a stop that is too tight can take you out too early in many cases. A 4% target is plenty, unless you are willing to stay in the trade for quite a long time. This will keep you in the trade on average 2-5 days. Better to take it and move to the next opportunity. Also strongly suggest that you stick to good companies from an FA standpoint, as they tend to collect buyers on weakness, and try to hold a few positions at once, as there is goodness in diversity. Finally, as there are plenty of stocks to trade long in this type of strategy, stay away from shorts. Higher risk, and you don't need that.