Let Trade Run -- No Exit

[lindq]

Quote from frostengine:



Any thoughts on ways to manage the trade better? Exit strategies to try?

I have no idea what you're trading, or what your basic strategy is, because you didn't specify. Always a problem in these threads.

But in nearly all instruments I've traded long intraday, unless you're scalping, statistically you're better off letting things run until EOD. That's for the simple reason that over time a few big winners can contribute a lot to your win/loss ratio. If you cut those winners off at the legs, your overall equity curve can suffer.

Psychologically, letting trades run when you've got a nice profit is a very difficult thing to do. But in terms of probabilities, it's the way to go.

 

[Lucias]

I've basically found this to be true. I explain it thinking about it in this way in my trading:

Trends are most efficient but aren't necessarily the best way to trade.

Trading more contracts with targets is less efficient but can have better risk adjusted returns.
---

Now in terms of systems.. if you're just looking at the NET return and not factoring in the stop loss, % winning, and risk adjusted return then you aren't getting a the full picture. Also you have to ask yourself what you can personally "take".

Honestly.. I have NEVER been interested in most systematic trend following strategies because the MAX losing trades are always gigantanamous!

another thing I've found is that it is better to take a target then a stop... this is too long to go into but in general if you use a stop then setting a target can help.

But again you have to know what your goals are.. you typically want the smoothest equity curve. not the max return.. this allows for leveraging and means a better risk adjusted return

Quote from frostengine:

I am testing an intraday strategy that performs the best if all I set is a stop loss, then allow the strategy to only exit on market close (or some preset time). Obviously the strategy works by finding the right direction to get in, then ride the trend. However, most "trend following" exit strategies seem to degrade performance significantly.

I have tried specifying different set times other than market close, such as a few minutes before.. 30 min before etc.. In an effort to make sure it was not something specific to the close itself (such as bad data). All tests regardless of which pre-set time appears to perform great.

Any thoughts on ways to manage the trade better? Exit strategies to try?

 

[HurricaneUS]

Quote from lindq:

I have no idea what you're trading, or what your basic strategy is, because you didn't specify. Always a problem in these threads.

But in nearly all instruments I've traded long intraday, unless you're scalping, statistically you're better off letting things run until EOD. That's for the simple reason that over time a few big winners can contribute a lot to your win/loss ratio. If you cut those winners off at the legs, your overall equity curve can suffer.

Psychologically, letting trades run when you've got a nice profit is a very difficult thing to do. But in terms of probabilities, it's the way to go.

^^^This

I'd also like to add that obviously you shouldn't be taking trades after midway through the trading session in order to give the trade enough time to run...so if trading stocks you wouldn't want to take trades after...12pm ish to 1pm ish NY time

Letting them run til EOD can lead to some phenomenal profits if your trading with the trend due to those monster outlier days in which the market opens on one end and closes on the opposite end...in fact you can get one trade on a full position that will make it virtually impossible to give back all of your profits providing you're also using stops....

 

[frostengine]

I am trading ES (5 minute bars). Stops are placed when trade is entered at 15 ticks. No other exit, except exit on close.

Winning percentage is around 49% with per trade expectancy of $87 over 10 years of testing. If I introduce any typical "trend trading exit" strategies, expectancy drops to around $30 to $40 depending on exit type.

 

[fan27]

Quote from frostengine:

I am trading ES (5 minute bars). Stops are placed when trade is entered at 15 ticks. No other exit, except exit on close.

Winning percentage is around 49% with per trade expectancy of $87 over 10 years of testing. If I introduce any typical "trend trading exit" strategies, expectancy drops to around $30 to $40 depending on exit type.

what is your max draw down? how often does it trade?

 

[ssrrkk]

Quote from frostengine:

I am trading ES (5 minute bars). Stops are placed when trade is entered at 15 ticks. No other exit, except exit on close.

Winning percentage is around 49% with per trade expectancy of $87 over 10 years of testing. If I introduce any typical "trend trading exit" strategies, expectancy drops to around $30 to $40 depending on exit type.

Sounds believable. Your directional guess is 50/50. But since you limit your losses while you let your gains run, you get a positive expectation. Your stop loss is 15 ticks so that means your gains on average must be getting more than 15 ticks = 3.75 ES points. I guess this is realistic also... So as someone else asked, what is the number of trades per year (i.e., how many days do you trade, how many have zero entries)?

 

[ssrrkk]

Quote from ssrrkk:

Sounds believable. Your directional guess is 50/50. But since you limit your losses while you let your gains run, you get a positive expectation. Your stop loss is 15 ticks so that means your gains on average must be getting more than 15 ticks = 3.75 ES points. I guess this is realistic also... So as someone else asked, what is the number of trades per year (i.e., how many days do you trade, how many have zero entries)?

I am guessing that your draw down will be relatively large with a 15 tick stop. 5 losers in a row can happen quite often; that's 75 ticks or 18.75 ES / SP points. If trading just one contract, that can be about $940 + commission... 10 consecutive losers can easily happen in 10 years, that's $1880 + commission loss. I guess that's not too bad...

 

[murray t turtle]

Quote from frostengine:

I am testing an intraday strategy that performs the best if all I set is a stop loss, then allow the strategy to only exit on market close (or some preset time). Obviously the strategy works by finding the right direction to get in, then ride the trend. However, most "trend following" exit strategies seem to degrade performance significantly.


Any thoughts on ways to manage the trade better? Exit strategies to try?

==============
Frost-E;
I understand most or all of your question;
not that i would call a daytrade a trend-sure you can spot something like that[a partial trend] on 30 or 58 minute candles

Trend followers make money with time in market/few comissions;
having said that, mourning/entry trades can be profitable because over a long period of time, thats can be more time in market....................................................No wonder, ES ,SPY are great liquid trades, not great trenders. Sure, they trend, some.

Frankly i enter near close more than exit. To exit near close means it was an unusual good trend day-Not many of those.

Thats not an ad for market making;
Market Makers Edge[ Book] has multimonth charts ...............

 

[BCE]

Quote from BCE:

"No one ever went broke taking a profit."

Quote from HurricaneUS:

dumbest statement ever.....People go broke all the time "taking a profit"....

Why? because the vast majority of losing novice traders have losing trades that are much much larger than their winners...any real trader would already know that

A smug statement. Especially the way it's worded. Actually it's not only not the dumbest statement ever, but not dumb at all. Losing novice traders, as you call them, who have losers bigger than their winners has nothing to do with this. Holding losing trades for big losses is their problem, not taking sizable profits when they're there. Traders have gone broke holding losing trades too long and failing to cut losses short. If you don't know when to take a profit, and try to turn every trade into a home run trade, you'll be a loser too. Quoting you, "..any real trader would already know that."

 

[BCE]

Quote from BCE:

We discussed some of this, especially I did, in the crude oil thread, CL Redux, the last while. I don't have time right now to find all the posts, but you can look through my posts. Yesterday I had a short position in CL near the first hour high of the day, HOD, at that time. And I caught it within about 10 ticks of the top before a selloff. And I was up $700 at one point as I let the trade develop. And it was up $600-700 for quite a while. But I let it go too long and it retraced the whole move to b/e and I made nothing. And then it broke higher and I was busy doing something else and I missed that too. Oh, well.

A lot of this has to do with what you're trading, when you're trading it, what the action is that day, whether you're trading with the trend or against it, your entry, and a lot of other factors. It's good to let a trade develop obviously to maximize profits, however it's also important to take significant profits once they are there before they disappear maybe. As they always say, "No one ever went broke taking a profit."

I was honest enough to share my story about letting a trade run, but then also letting a profit evaporate to nothing as an example of not taking a profit, and as part of this discussion about when to take a profit. One should take a sizable profit when it's there, especially if you're doing a counter-trend trade against the prevailing trend and there's no evidence that trend has reversed.

There are a lot of smug people on this site that are full of themselves and put on airs of expertise. I talk about what I do whether it's good or bad, and point out what went well and what didn't and discuss it as an offering to other people here so that we may all learn from one another and become better traders. I'm not so insecure as to not be able to, in a good natured way, poke fun at my own failings. And I have no hesitation to make them public. And when I don't agree with someone, I just state it in a respectful way.