Quote from golablue:
Hi Niha-
I was hoping that you might be so kind as to answer a question that I have regarding the exit strategy that you have shared throughout this thread and the original "Hammers" thread.
While your trading plan calls for entries that are, "price action based," your exits are not based on price action. Rather, it appears they are based on WRB's (Support/Resistance).
That said, I'm wondering why it is that you chose NOT to base your exits on "price action," as you do your entries?
Example: You see a hammer line that develops into a pattern, and meets all of your criteria, you enter the market.
Why are you not looking for another line that develops into a pattern, and meets your criteria for entry in the opposing direction of your position to exit (or reverse)?
Any light you could shed on this question would be most appreciated. 
Hi golablue,
WRB analysis for profit targets
are price action only (no indicators) exits.
S/R Analysis is a price action only method.
Also, exiting via the same type of patterns that got you into the trade is less efficient (you leave more money on the table) in comparison to exiting via a WRB.
As I said before, once you get past the first WRB profit target 1 (pt1)...that's where it becomes
subjective and your experience level will determine where you exit your
remainders regardless if it involves WRBs or similar like patterns that are opposite of your entry signal or a combo of both.
Just be careful about using patterns to tell you its time to exit a trade because your really talking about using another trade signal.
What I mean is this...lets say you use a Bullish Hammer pattern to get you into a trade and you use a Bearish Inverted Hammer pattern to tell you its time to exit your trade.
What happens if the Bearish Inverted Hammer pattern doesn't appear or what happens if you get no other pattern signal to tell you its time to exit the trade?
My point...you want to use an exit method that exploits changes in supply/demand instead of waiting for a pattern signal that may or may not appear.
WRB's will
always appear in your favor or not in your favor and sometimes they are involved in patterns.
For example going back to my Bearish Inverted Hammer pattern as an example...
cnms2 posted this chart in this thread back on 04-24-06 06:13 PM
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1049573</img>
Pretend you had entered that trade around 85 (not shown on the left side) and you watched it moved up higher to test the 98 price area via the high of that Dark Inverted Hammer
Line.
You could have exited at the White WRB that occurred
prior to the Dark Inverted Hammer Line or exited at the pattern confirmation of the Bearish Dark Inverted Hammer
Pattern on the close of the Dark Line in the interval
after the Dark Inverted Hammer Line.
Obviously the White WRB would have gotten you out at a better price.
Then again on the flip side...if that Bearish pattern didn't appear...it could continue declining back to your 85 without ever giving you an exit signal.
Just the same...it could have gone higher.
It's subjective and very dependednt upon your experience level with these types of exits.
Reason why in the beginning...just keep it simple and exit via WRB's until you gain some experience (a minimum of one year) to try a more difficult exit methodology such as via pattern signals only.
Someone once told me that exit methods based upon WRBs are
conservative less risky whereas exit methods based upon pattern signals are
aggressive and more risky.
P.S. I have recently (currently) been doing a lot of position reversals but not via a confirmed pattern signal like an entry signal but via volatility analysis (beyond the scope of this thread).
It's something I'm aggressively testing to determine if its suitable or merits a permanent place in my trading plan...
Very difficult trading at the least.
Mark
(a.k.a.
NihabaAshi) Japanese Candlestick term
