The most standard and general advice in trading is "let your profits run" What they never say is run them for how long. Run them until you turn a loss, break even or.... With most trend following systems, unless some mega trend is in place, very often all or most of the profit in a position is wiped out by the time the trend changes. Has any one got suggestions on how to go about closing a trade. It seems to be far more critical that how to entre a trade.
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Taking Profits
- Thread starter gifropan
- Start date
I agree with you that this is the hardest part of trading to figure out. I have come to the conclusion that the only thing you can do is pick out one system and stick to it. Every type of exit is a compromise of some sort. Trailing systems give bigger wins but fewer of them. Targets give more but smaller wins. Pick your poison. There certainly is no perfect way.
Quote from gifropan:
The most standard and general advice in trading is "let your profits run" What they never say is run them for how long. Run them until you turn a loss, break even or.... With most trend following systems, unless some mega trend is in place, very often all or most of the profit in a position is wiped out by the time the trend changes. Has any one got suggestions on how to go about closing a trade. It seems to be far more critical that how to entre a trade.
I don't know whom "they" are but I do know there's been many threads at ET about exactly when to take profits, managing trailing stops et cetera.
http://www.elitetrader.com/vb/search.php?s=
Also, your exit signal should have some commonalities with your entry signal (not mirror...just some commonalities).
Mark
Quote from gifropan:
The most standard and general advice in trading is "let your profits run" What they never say is run them for how long. Run them until you turn a loss, break even or.... With most trend following systems, unless some mega trend is in place, very often all or most of the profit in a position is wiped out by the time the trend changes. Has any one got suggestions on how to go about closing a trade. It seems to be far more critical that how to entre a trade.
The solution. Trail the stop. ATR/Chandalier stops i find work very well on my weekly trend following system.
Not sure what you mean by almost all or most of the profit is wiped out by the time the trend changed. One of my winners Iv only been in the stock for 4 weeks its up about 25% and my stop has quickly followed it upwards and now instead of at 15% loss its at about a 12% profit.
If what you say is true, then trend following systems would not be profitable.
But actually they are. Well mine definately is very profitable.
So I suggest you get educated buddy. Perhaps my blog would be a good start.
thetrendfollower.blogspot.com
And for your comment about exit being more critical than entry, well I think they are both important.
I have tested my system against random and my entry with random exit significantly outperforms random entry with my exit. And that's after specifying the exit to trigger after a certain number of bars so its given a fair comparison (no increased holding time bias).
All my testing is all on the blog anyway.
Best regards,
Nizar.
Dear thetrendfollowe. You just reaffirmed my point. Your trend following stop will take 12% profilt out of the 25% you already have. Now suppose your profit level had not reached 25% and say it was at 8%. I presume then that if you held the position until your stop was hit the trade would loose. I also think what I am talking about might be more relevant to intraday trading than position trading
Regards
Bob
Regards
Bob
Quote from gifropan:
Dear thetrendfollowe. You just reaffirmed my point. Your trend following stop will take 12% profilt out of the 25% you already have. Now suppose your profit level had not reached 25% and say it was at 8%. I presume then that if you held the position until your stop was hit the trade would loose. I also think what I am talking about might be more relevant to intraday trading than position trading
Regards
Bob
Dear Bob,
All the parameters that I use for my trading has been extensively backtested, and the stop I apply now is what works best over a large number of trades.
If you take profits too quickly then you will never have a big winner.
The 25% example could maybe go to 100% or 200% who knows.
But yes you are correct for intraday different strategies may be more appropriate.
All the best,
Nizar.
in my humble opinion, it all depends. and you have no idea how much i hate saying that. i mean we all are here to help right. so the best i can do is give you an example.
but before i do, if you are only talking about intra-day then there is time to consider as well as any profit target or trailing exit.
back to the example. when i started trading futures in 1997, i started daytrading in the fine market of live cattle. don't ask me why.
after about four months of ups and downs, showing a small profit, and trailing the stop. i was reviewing my trades in detail. i noticed that when i made a profit, it always exceeded $200 a contract. and even when i lost, i was usually up around $100 at some point before the fall.
so i started exiting at a $150 profit. regardless of what the market was doing, when i hit my $150 i fired off the exit order. keep in mind i was a small time futures trader with a $5k account. as the account grew, i added contracts so instead of one, i was trading 2 and kept this up until i was trading 5 at a time.
i was hitting around 7 out of 10. so i thought, hell lets try 10. and it blew up. i had hit critical mass for my entry/exit combo. i finally found the maximum contracts i could trade and make money was 6.
the point i guess that i am trying to make, is that exits are a function of your strategy and goals. where can you make the most money.
i no longer day trade on a regular basis. i use multiple profit exits. i have a minimum target i am looking for, a timed exit after the trade is in the money, a trailing stop, and a volatility exit. and then there are 3 exits on the downside.
but before i do, if you are only talking about intra-day then there is time to consider as well as any profit target or trailing exit.
back to the example. when i started trading futures in 1997, i started daytrading in the fine market of live cattle. don't ask me why.
after about four months of ups and downs, showing a small profit, and trailing the stop. i was reviewing my trades in detail. i noticed that when i made a profit, it always exceeded $200 a contract. and even when i lost, i was usually up around $100 at some point before the fall.
so i started exiting at a $150 profit. regardless of what the market was doing, when i hit my $150 i fired off the exit order. keep in mind i was a small time futures trader with a $5k account. as the account grew, i added contracts so instead of one, i was trading 2 and kept this up until i was trading 5 at a time.
i was hitting around 7 out of 10. so i thought, hell lets try 10. and it blew up. i had hit critical mass for my entry/exit combo. i finally found the maximum contracts i could trade and make money was 6.
the point i guess that i am trying to make, is that exits are a function of your strategy and goals. where can you make the most money.
i no longer day trade on a regular basis. i use multiple profit exits. i have a minimum target i am looking for, a timed exit after the trade is in the money, a trailing stop, and a volatility exit. and then there are 3 exits on the downside.
Quote from gifropan:
The most standard and general advice in trading is "let your profits run" What they never say is run them for how long. Run them until you turn a loss, break even or.... With most trend following systems, unless some mega trend is in place, very often all or most of the profit in a position is wiped out by the time the trend changes. Has any one got suggestions on how to go about closing a trade. It seems to be far more critical that how to entre a trade.
In all fairness, this question in isolation is meaningless.
The exit forms one part only of a trading philosophy. Change any one component and you alter the entire thingy.
regards
f9
I think profit taking exits have potential in intraday trading.
Only because you are not focussing on increasing R/R.
For short termers, R/R and win% don't need to be overly impressive.
1.2 and 60% and a decent amount of trade frequency/opportunity you are laughing.
Because in short term trading its the trade frequency that brings home the bacon.
In long term trend following, because win% is 50 at best (many are less), if you don't hold onto those winners then you cant pay for all those losses.
Only because you are not focussing on increasing R/R.
For short termers, R/R and win% don't need to be overly impressive.
1.2 and 60% and a decent amount of trade frequency/opportunity you are laughing.
Because in short term trading its the trade frequency that brings home the bacon.
In long term trend following, because win% is 50 at best (many are less), if you don't hold onto those winners then you cant pay for all those losses.