Optimal exit point once a position has turned against you?
- Thread starter colina
- Start date
1. you enter on a signal.
2. the sequences you have learned and have on sheets continue to unfold properly.
3. a flaw pops up, you press the button to exit at market.
You do 1. and 2. and then you hesitate or go to the bathroom.
When you return (or unfreeze) you:
3. find out where you are in the sequence.
4. if you are in a "change" location; do a reversal and go to 1 above.
4a if you are in a "continuation" location, you sideline with a loss.
If you are in a channel and you have a traverse under way, you are not on your stops and there is no flaw in the works. It just means that there is a trend and you are in it and the contemporary price is not currently profitable. do the following:
1. watch the volume, stay in if it is decreasing.
2. when the volume resumes, assure that the trend in price resumes,
3. when you entry value is reached press the button to go out at market just for the experience of washing out.
4. if you wish stay in and then continue to watch the volume, when it flags, then press the putton and take a profit.
5. if you want to make a little more money check to see if you are in a "change mode". If so reverse instead of exiting. Go to step one at top at this point.
Read the attachment below as well. Use the weekend to make up some sequence lists.
2. the sequences you have learned and have on sheets continue to unfold properly.
3. a flaw pops up, you press the button to exit at market.
You do 1. and 2. and then you hesitate or go to the bathroom.
When you return (or unfreeze) you:
3. find out where you are in the sequence.
4. if you are in a "change" location; do a reversal and go to 1 above.
4a if you are in a "continuation" location, you sideline with a loss.
If you are in a channel and you have a traverse under way, you are not on your stops and there is no flaw in the works. It just means that there is a trend and you are in it and the contemporary price is not currently profitable. do the following:
1. watch the volume, stay in if it is decreasing.
2. when the volume resumes, assure that the trend in price resumes,
3. when you entry value is reached press the button to go out at market just for the experience of washing out.
4. if you wish stay in and then continue to watch the volume, when it flags, then press the putton and take a profit.
5. if you want to make a little more money check to see if you are in a "change mode". If so reverse instead of exiting. Go to step one at top at this point.
Read the attachment below as well. Use the weekend to make up some sequence lists.
Hi Colina
Getting out of positions is an emotionally wrenching experience.
One way to make it easier is to cut the position in half as soon as it turns against you. You'll feel stronger that you were able to do this, it takes the pressure off saving the remaining stake and of course, you probably saved some money.
Discipline is good. Many traders use the 1%rule - never take a loss of more than 1% on any single trade.
Type out your rules. Print them off. Believe them. Survive.
Best wishes.
Getting out of positions is an emotionally wrenching experience.
One way to make it easier is to cut the position in half as soon as it turns against you. You'll feel stronger that you were able to do this, it takes the pressure off saving the remaining stake and of course, you probably saved some money.
Discipline is good. Many traders use the 1%rule - never take a loss of more than 1% on any single trade.
Type out your rules. Print them off. Believe them. Survive.
Best wishes.
A problem could be half solved when one asks the good question. How can you ask about OPTIMAL EXIT when one doesn't even know about your supposed (?) OPTIMAL system 
.
.If a trade goes against you, but doesn't hit your initial protective stop, and then begins to retrace in your direction, try trailing your stop just below the new pivot that was formed (if long, and vice-versa for shorts).
I've also had a lot of trouble getting stopped out at break-even when a trade goes my way because I tend to begin trailing my stop too soon. What I do now in that situation is to leave my initial stop in place and wait for the almost inevitable retracement back through my entry price. Then, when (or if) the market continues in the direction of the trade, I will move my stop to just behind the new pivot. (An exception to this is when the trade takes off immediately and gives me a windfall - in that case I will trail my stop much more aggressively or take some profits).
Hope this helps.
I've also had a lot of trouble getting stopped out at break-even when a trade goes my way because I tend to begin trailing my stop too soon. What I do now in that situation is to leave my initial stop in place and wait for the almost inevitable retracement back through my entry price. Then, when (or if) the market continues in the direction of the trade, I will move my stop to just behind the new pivot. (An exception to this is when the trade takes off immediately and gives me a windfall - in that case I will trail my stop much more aggressively or take some profits).
Hope this helps.
Another technique that may help you to exit with a wash when you're down on a trade and just want to get out as best you can is to "bracket" the price action with a stop and a limit order (This also works well for maximizing profits when trying to exit at target levels).
Place a limit order at breakeven (or wherever you'd like to exit), and gradually trail your stop order closer and closer, tightening the bracket.
I do that a lot when I'm stuck in "no man's land" - that place between the entry point and the protective stop where it just chops around in losing territory and tortures you. I also use it when tring to take profits and the market just doesn't want to make it quite to my target.
It also helps to use a charting time frame slightly smaller than the one that you are trading in, and trail your stop behind any support/resistance that is formed.
P.S. You do use resting orders in the market, don't you? That could solve many of your other problems also, since you don't have to pull the trigger - you've made the decision ahead of time.
Place a limit order at breakeven (or wherever you'd like to exit), and gradually trail your stop order closer and closer, tightening the bracket.
I do that a lot when I'm stuck in "no man's land" - that place between the entry point and the protective stop where it just chops around in losing territory and tortures you. I also use it when tring to take profits and the market just doesn't want to make it quite to my target.
It also helps to use a charting time frame slightly smaller than the one that you are trading in, and trail your stop behind any support/resistance that is formed.
P.S. You do use resting orders in the market, don't you? That could solve many of your other problems also, since you don't have to pull the trigger - you've made the decision ahead of time.
Quote from harrytrader:
A problem could be half solved when one asks the good question. How can you ask about OPTIMAL EXIT when one doesn't even know about your supposed (?) OPTIMAL system
Must agree with harry here. Traders are always asking about optimal exits, where they would never even dream to ask about optimal entries.
You don't know. The diff between entry and exit is, missing an entry poses no risk to capital, where missing an exit does. Therefore, the trigger must be pulled , and pulled faster on exit. But there really is no single answer to the question. Depends on your methods , your bankroll, the market , etc.
There are several issues floating around here. Let's look at them briefly:
1. Initial stop. From backtesting, you determine that a trade that goes n amount against you seldom comes back with in the relevant time frame. That is where you place your initial stop. Wealthlab has a nice feature called MAE , max adverse excursion, that gives you a nice visual representation of that concept.
If that stop is too wide, then you have to come up with another entry method or use a smaller timeframe and retest.
I Like to use this initial stop as a disaster stop that is seldom hit.
2. Risking 1-2% per trade. Many experts advise that you risk no more than 1 or 2% of your account per trade. $10,000 account, you can risk $100-200 per trade. This is used for position sizing however, not for determining the initial stop. That depends on the market, time frame and entry method.
3. What triggers an exit?
a. For a trade that has not cleared the noise zone around the entry price, I am looking for anything that invalidates the entry criteria. For example, if my entry is based on crossing a pivot point, if it reverses back below the pivot, then the trade is on thin ice and probably should be exited pretty quickly. waiting for the stop to be hit can be costly, but for systems traders, that may be a requirement. Otherwise the system testing is invalidated.
b. For a trade that clears the entry zone, I pull the stop to break even. This puts into place the important adage "never let a profit turn into a loss." The exercise then becomes one of managing the profit.
c. Taking profits. Kachingo, baby, this is what we live for. There are a lot of adages here too, such as no one ever went broke taking a profit, or if it's not booked, it's not jack. But don't lose sight of "Let your winners run." Hopefully youhave some sense from backtesting how far to let your winners run. I'm not a big fan of profit targets, except in crappy range-bound markets. The big moeny comes from catching a big move and sticking with it. Some ideas for getting out are a nasty reversal bar or pattern, clearing obvious resistance (if long) then pulling back, an oscillator divergence, a trendline break or the close coming up. A good guide is never let more than 50% of a big profit get away from you.
Hope this helps.
1. Initial stop. From backtesting, you determine that a trade that goes n amount against you seldom comes back with in the relevant time frame. That is where you place your initial stop. Wealthlab has a nice feature called MAE , max adverse excursion, that gives you a nice visual representation of that concept.
If that stop is too wide, then you have to come up with another entry method or use a smaller timeframe and retest.
I Like to use this initial stop as a disaster stop that is seldom hit.
2. Risking 1-2% per trade. Many experts advise that you risk no more than 1 or 2% of your account per trade. $10,000 account, you can risk $100-200 per trade. This is used for position sizing however, not for determining the initial stop. That depends on the market, time frame and entry method.
3. What triggers an exit?
a. For a trade that has not cleared the noise zone around the entry price, I am looking for anything that invalidates the entry criteria. For example, if my entry is based on crossing a pivot point, if it reverses back below the pivot, then the trade is on thin ice and probably should be exited pretty quickly. waiting for the stop to be hit can be costly, but for systems traders, that may be a requirement. Otherwise the system testing is invalidated.
b. For a trade that clears the entry zone, I pull the stop to break even. This puts into place the important adage "never let a profit turn into a loss." The exercise then becomes one of managing the profit.
c. Taking profits. Kachingo, baby, this is what we live for. There are a lot of adages here too, such as no one ever went broke taking a profit, or if it's not booked, it's not jack. But don't lose sight of "Let your winners run." Hopefully youhave some sense from backtesting how far to let your winners run. I'm not a big fan of profit targets, except in crappy range-bound markets. The big moeny comes from catching a big move and sticking with it. Some ideas for getting out are a nasty reversal bar or pattern, clearing obvious resistance (if long) then pulling back, an oscillator divergence, a trendline break or the close coming up. A good guide is never let more than 50% of a big profit get away from you.
Hope this helps.