Exits-- targets vs. trailing stops

Breakouts with big runs in the SP usually happen around 30x per-year. Has been true since the SP started trading. Since you never know when a breakout will start, you need tight stops in the first two hours. After that, the probability of a trend day happening goes up quickly (especially if the market breaks out above the previous high/low of the day after the two hour period).

Here's what you can do with breakout trades for the SP using 3/4% risk per-trade and being somewhat selective. Starting equity was 150k in 1983.
 

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Originally posted by acrary
Breakouts with big runs in the SP usually happen around 30x per-year. Has been true since the SP started trading. Since you never know when a breakout will start, you need tight stops in the first two hours. After that, the probability of a trend day happening goes up quickly (especially if the market breaks out above the previous high/low of the day after the two hour period).

Here's what you can do with breakout trades for the SP using 3/4% risk per-trade and being somewhat selective. Starting equity was 150k in 1983.
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Interesting. What's your definition of a "big run"? Do you get out at the end of the day?

OldTrader
 
Big runs are otherwise known as trend days. During these days the market starts near one end of the high/low and moves toward the low/high by the end of the day. For counting these moves the open must be with 10% of the high/low for the day and the close must be within 20% of the low/high on the opposite extreme.

In 2000 there were 33 of these days.
In 2001 there were 35 of these days.
So far in 2002 there have been 37 of these days.

The last 5 were 10/11, 9/17, 9/3, 8/19, and 7/24.

In the model's results that I posted, all trades are exited MOC.
 
Hi Acrary,

I hope you won't mind answering a few questions.

When you say within % of high low, are you refering to percentage of the move? So a 200 point move for example the 10% you refer to would be within 20 points of the open? (I'm thinking Dow here, but for S&P it would 1/10ths instead of points).

What do you mean by MOC - never heard that term before.

How do you spot that you are in one of those types of days?

Thank you

Girlpower
 
If the SP market had a 30 pt. up move, the opening price would have to be within 3 pts. of the low and the close would have to be within 6 pts. of the high. To me that defines a trend day pattern in daily price data.

MOC is a Market on Close order.

You can never know for sure you're in one of those days until the day is over. That's why I have losing trades. In the model results I posted, it looks for a daily pattern indicating a possible explosive breakout. During the day the SP market will not move much below the open if it's a possible trend up day. One clue I found is that the high and low in the first 2 hours is critical. From past data 90% of the time either the high or low for the day is formed in the first two hours of trading. If we had a possible trend up day, the market should breakout above the 2 hour range.
 
Thanks Acrary,

Looks like I will be expanding my thinking considerably. Time to start building a statistical model I think...

Thanks again :)

Girlpower
 
If you really want to study this stuff, I suggest getting all the Toby Crabel articles on the TASC website:

http://search.traders.com/Tanalysis.acgi$search?.Details=Details&.SearchText=toby+crable&.SearchArea=All

I bought his book years ago and it was priceless. Last I heard old copies were selling on Amazon for about $1,000.

Another more common form of breakouts that works in the SP market is the range extension breakout. I look for patterns in the daily data that suggest an extension of the previous days high/low is probable. I look at the morning range and take trades after 2pm et in the direction of a breakout if the previous days range hadn't been extended. Often this leads to a strong directional close for the day. Since this happens often, you get lots of trades and most of them don't win, but overall it's a winning strategy.

Here's the results of a model using range extension risking 1/2% per-trade since 1983 starting with 150k in the account:
 

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Agree with your post Oldtrader.
My toughest battle has been staying in profitable trades longer.
Not sure what it's going to take,but at at this point resisting the temptation to close a profitable trade is very tough.
I have to get used to the fact that uptrends do last for more than 5-20 minutes.
Playing countertrend bounces the last month or so has had me used to bailing early and even then leaving money on the table.
Your discrtionary exit sounds like the logical thing to do but at this stage I need some more concrete rules for exiting.
Maybe giving the trades more time to work will come with a larger account, but I'm not going to get there without letting them run.
 
Originally posted by monee
I would like to start a discussion about having an exit target vs. a trailing stop.

The trailing stop, trailing by a fixed amount doesn't work well due to the fact that the volatility of the mkt is different each day.

The moving average has the same problem some days a 10 period works other days a 20 period works ,ect.

So what I am thinking is, go with a price target and if after a minimum gain you specify, trail by the fact that all profit above this gain you only will allow x % of this gain to be taken back by the market before closing the trade.

Or just have an exit target and when the market hits that ,then you trail or if it doesn't hit that, it hits your stop.

Psychologically this last method would be tough for me having a big profit but not reaching the target and giving all the profit back.Even though psychologically this last method is the toughest,
my gains overall would have been greater using it.

This is all concerning intraday trading.

Well this is only my opinion, what are everyone elses thoughts?
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Depends on how much you make on the trade. Are you looking for nickles? Dimes? Quarters? Halfs? or more?
 
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