i know this is obvious, but...

[Dantheman]

Dottom posted:

I have always, always felt that ENTRIES are always MUCH MORE important than EXITS. I have my own proof of this but I am not willing to share at this time, sorry, but it involves some proprietary stuff I'm being paid to do for hedge fund.

Ok that right there is useless...if you have "proof" either share it or don't.

Nonetheless, to take the poker analogy, if you consider when to BET or RAISE as your "entry" and FOLDING as your "exit", you can ask any professional poker player which is more important and they will tell you that knowing when to BET or RAISE is more important than FOLDING.

I doubt that. You must also know when to fold, take your loss and get the hell out. That type of exit is more important than betting or raiseing because it allows to play the winning hands. Same with trading. It is more important to get the hell out if it's going against you and passing your risk threshold than to get the hell in when the trade LOOKS favorable.

I'm not saying that EXITS are not important, for they certainly are, but there is too much trading folklore out there saying that EXITS are the most important. That you can take any random entry and apply great exit and be profitable. How about taking a great entry and applying an random exit??

I never said nor will ever say that you can "take any random entry and apply great exit and be profitable." NO ONE said that.

You capture your profit or you limit your loss with your exit. Your entry either increases or decreases the probabilty of you having a good/bad trade. We both know that entries and exits are important and BOTH must be executed with skill. I say exit is more important, you say entry. Are we both going to make money? Yeah probably so. SO WHO CARES?

I should know because I used to be a professional poker player (made my entire living playing poker and nothing else).

Think of it another way, and ask any short-term prop trader, would you rather have the ability to:

1. pick a great entry where the market takes off in your direction, use whatever stop method you like to exit

2. pick a so-so entry where the market moves above and below your price, now you require a great ability to exit to maximize profits/minimize losses

I always think about my potential trades in this order..."where do i want to get out, where is my loss point, how will I manage this trade, and LASTLY after all this has been thought out I look for my entry." Sometimes this takes a few seconds, sometimes a few minutes, sometimes it is instantaneous.

Emphasis is on EXIT, management of the trade, ENTRY. NOT entry , management, exit. But hey, if it works that way for you, more power to you.

 

[dottom]

Quote from marketsurfer:
great entries can only be known in hindsight, but great exits can be known with foresight.

The same problem exists with exits. You do not know if that was a "good" without hindsight.

Just because you have, say a 4.00-pt stop loss on ES and you exit when your stop is hit, then pat yourself on the back for taking small losses, then the market reverses and shoots up, that is NOT a good exit. It was good in the sense that it fit in your discipline and trading rules, but you can evaluate the effectiveness of the exit with hindsight, just like you can with entries.

I know there is a lot of trading "religion" around exits because an exit is what completes the round-turn process of a trade, but trust me, entries are definitely more important. BOTH are necessary so much of this debate is academic, but I just wanted to put a stake in the ground and let you know that exits are NOT more important than entries, if you are going to analyze each individually.

I'm just not willing to reveal my proof at this time, but I'm sure you can devise your own proof starting with empirical analysis and follow through with statistical data.

P.S. I think when most people say "exits are the most important" aspect of each trade they should instead say "trade management is the most important". And trade management includes both your entry and your exit.

 

[dottom]

Quote from Dantheman:
Emphasis is on EXIT, management of the trade, ENTRY. NOT entry , management, exit. But hey, if it works that way for you, more power to you.

The reason exits are so heavily emphasized in trading lore is because that is how most people affect "management" of their trade (profit targets, stop losses, etc.).

However, if you look at scientific analysis of the benefits of entries vs. exits, you will find the following to be true:

  (great entry + random exit) > (random entry + great exit)

Would anyone ever use a random exit in real trading? Of course not. But how many threads are there on ET discussing random entries for the sake of analysis? Well, reverse it and try random exits.

Just think about this premise. The fact that the entry occurs prior to the exit by nature gives the entry greater affinity to affect the final result. Don't assume that just because the exit is the last step to complete a round-turn event that it is more important. Statistical analysis will confirm the above. Trading lore and peusdo-general trading observations will have you believe otherwise because it is so easy to understand the causal effect of exits on your final result.

You can take even take this one step further and analyze the chaotic characteristics of the exit's dependency on an event that precedes it, i.e. the entry. The sensitive dependence on initial conditions, a fundamental characteristic of chaos, reveals itself in the microcosm of a single trade. This is true regardless of whether you believe the markets are chaotic or only semi-chaotic.

 

[Dantheman]

We trade our beliefs. I'll let you have the last word on this.

 

[dottom]

Quote from Dantheman:

We trade our beliefs. I'll let you have the last word on this.

ditto

 

[uptik2000]

At Gordo's first post I said to myself, "Ok, one of these threads, no biggie".
However, after just reading through it, I need to subscribe. A lot of good people have responded with some good advice worth keeping.

Damn. Mother nature is such a tease. Snowed like mad for about an hour. Not much accumulation.

 

[marketsurfer]

Quote from dottom:


The same problem exists with exits. You do not know if that was a "good" without hindsight.

Just because you have, say a 4.00-pt stop loss on ES and you exit when your stop is hit, then pat yourself on the back for taking small losses, then the market reverses and shoots up, that is NOT a good exit. It was good in the sense that it fit in your discipline and trading rules, but you can evaluate the effectiveness of the exit with hindsight, just like you can with entries.

I know there is a lot of trading "religion" around exits because an exit is what completes the round-turn process of a trade, but trust me, entries are definitely more important. BOTH are necessary so much of this debate is academic, but I just wanted to put a stake in the ground and let you know that exits are NOT more important than entries, if you are going to analyze each individually.

I'm just not willing to reveal my proof at this time, but I'm sure you can devise your own proof starting with empirical analysis and follow through with statistical data.

P.S. I think when most people say "exits are the most important" aspect of each trade they should instead say "trade management is the most important". And trade management includes both your entry and your exit.

dottom,

i like your thinking. it seems our only disagreement is on the definition of the word "good". "good" does not need to mean maximum possible profit.

trade well,

surf

 

[ElCubano]

Things that make you go ,,,hmmmmmmm. Way to look at things.

What I am trying to say is if the hit ratio ( actually hitting your target) that most traders have is below 40% ( according to what I have read on these boards, could be more or less)....wouldn't it be more important to maximize your exit potential (assuming you have a choice)........peace

 

[wan2BTrader]

Quote from dottom:



I should know because I used to be a professional poker player (made my entire living playing poker and nothing else).

I can't figure out a move (stock) is for real or a fake. Do you think play poker help with this? If I only have time to read one book about playing poker, which book would you recommend?
Thanks.

 

[Magna]

Quote from wan2BTrader:

If I only have time to read one book about playing poker, which book would you recommend?

I'm not saying this is the only one worth reading, and it's not about the mechanics of poker, but a good book is Zen and the Art of Poker by Larry Phillips. It's a small paperback and a pretty easy read. Other than that, just like trading, to get a real feel for the ebb and flow of poker you have to sit down and play. A lot.