Exit Strategy : What's yours? - page 3

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a good read

Understanding Exits: Helpful Advice on Exit Strategies
  • Charles LeBeau
  • tradingmarkets.com
Exit strategies for investors and traders are a much neglected subject. There are thousands of books that attempt to teach us about what and when to buy but I can count the books about selling on one hand and have a few fingers left over. My fascination with the subject of exit strategies probably came about due to my very first “investment”...
 
Personally, I think we should put a stop loss and take profit each time, to expect the unexpected , a turnaround ...
When I use Bollinger bands , I tend to take profit when the price crosses frankly the standard deviation.
If I do not use Bollinger Bands , I love the feeling and stop trade take profit quickly, then resume and start in the direction of movement .
 

Margin call :D


Just kidding. The most important thing I consider is a key support or resistance level where I expect to see a reversal.

 

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Press review

newdigital, 2014.05.23 17:02

Should You Exit Your FX Trade On Strength Or Weakness? (based on dailyfx article)

  • Why Traders Neglect the Exit
  • Two Exit Approaches
  • Specific Tools for Both Exit Strategies

“You can’t control what the market does, but you can control your reaction to the market. I examine what I do all the time. That’s what trading is all about.”
-Steve Cohen, Hedge Fund Manager

In my experience, the more years a trader has under their belt, the more attention they pay to the exit on their trade. It’s not that the entry isn’t important, it’s just that there’s a direct profit impact based on your exit. This article will breakdown two methodologies for exiting your forex trades so that you can choose the one that aligns best with your personality & goals.

Why Traders Neglect the Exit

As a trader, it’s easy to focus on entering the trade. After all, you’ve got to be in it to when it and the only way to be in it is to find an entry. And when it comes to entering into a trade, your mind is likely to race to different outcomes about whether or not this trade will be a home-run that “can’t fail” or whether you’re not 100% sure on the trade and therefore, should either hold-off or enter with a smaller trade size. For what it’s worth, regardless of your analysis, the second attitude used as an example is the healthier approach


However, it’s probably best to take the pressure of yourself regarding the entry. Why? Because, you likely will get at best a decent entry unless you’re counter-trend trading. It’s an irony or paradox of trading that most new traders fret about the entries but where they decide to exit is the most crucial point.

Two Exit Approaches

This part is simple. As far as I’m concerned, there are only two ways that you can decide to exit a trade (well, three if not having a plan is a way to exit). The first method benefits short term traders and that is exiting on strength in the direction of your entry. Therefore, if you’re buying, you can look for clear resistance points or other methods to exit when others are jumping in. The drawback to this methodology is that you could be exiting as the move is just getting started.

The second method is to the benefit of swing style or longer term traders. The preferred exit methodology for longer-term traders is to exit on weakness or a correction in the trend that you’re entering. Exiting on weakness has two distinct drawbacks and that is you either get taken out on a wick low before the trend resumes and / or, you find yourselves leaving a large portion of your paper profits on the table.

Specific Tools for Both Exit Strategies

We just discussed that you can either decide to exit your trades on strength or weakness. To exit on strength, here are a few methodologies you can use that I’ve found favorable over the years:

My preferred methodology is Pivot targets. In a normal uptrend, I’ll look to exit at the weekly R1 level and in a strong uptrend, my preferred exit is the R2 (reversed for downtrends with S1 & S2). The other two methods have been used successfully by many traders.

Emotionally, I believe it’s harder for new traders to exit on weakness. The reason is that it’s easy to beat yourself up for letting so much of your paper profits go away. In order to be comfortable exiting on strength, it’s best to not look at the chart after you exit for a few hours because you don’t want to beat yourself for taking money out of the market. That’s what we’re doing here in the first place!


 
By indicator or opposite signal
 
I choose to close all open position if GREEN before want to go for other activities happily ;)
 
I always exit by the take profit or the stop loss.
 

Well for me I prefer to Exit the market when I have a good signal through Macd and Snake..

When Snake and MA Cross then I would love to exit the market with enough profit.. :) 

 

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Which strategy is best to close the position?

Sergey Golubev, 2013.05.29 08:03

If you have a strategy so exit should be part of it. Strategy without exit is not a strategy.

What the people are using for exit?

  • Parabolic
  • overbough/oversold levels (stochastic, demark and so on)
  • support/resistance level (povit, fibo and so on)
  • opposite signal to enter
  • openning the other trade on same direction with increased lot size (martingale)
  • openning the other trade on same direction with decreased lot size but with increased take provit value (anti-martingale)

I think - closing on overbough/oversold (stochastic etc), support/resistance (povit/fibo) and simple trailing stop are most popular for the people who consider about "let the profit run"


 

The Importance of Exit Strategy - Part #1 

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The threads on the forum : 

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Videos :

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Indicators: AutoTrendLines

Sergey Golubev, 2013.10.09 18:20

How to Exit While Trading with Trendlines

Talking Points:

  • Traders should focus on their exit plan just as much as their trade entries.
  • Trendline traders could set their stop losses beyond the nearest support or resistance level and set their limits within the nearest support or resistance level.
  • Setting exit prices according to support and resistance levels could tip the odds in your favor.
How Important Is Your Exit Strategy?

Many traders have a strong set of rules that they follow to enter trades, but have difficulty in selecting their exits. This is troubling because how we exit a trade should be just as important, if not more important than how a trade is entered. After all, our exits ultimately determine if our trades are profitable for us or not. So we need to make sure our exit strategy is just as logical as our entry strategy.

When we place our trades based on trendlines, we are placing them based on support and resistance levels. We are thinking the price will bounce off a trendline like it did in the past. I propose we use the same logic when setting our stops and limits.

In the example above, it’s easy to see the sell entry that was given to us based on the bearish trendline. We entered right at the trendline looking for a bounce back down, but where do we want to exit? When do we call it quits if the trade goes against us? Where do we place our profit target? Let’s take a look.

Setting Stops Beyond Support/Resistance

We need to look at placing our stop somewhere above this trendline. If the resistance is broken through, we were wrong on the trade and should accept the loss quickly. It’s possible that price could return back to profitable territory after breaking this resistance, but we cannot rely on being lucky. We can only trade based on what we see.

I like to set my stop 5-25 pips from the closest support/resistance level depending on the time frame I am trading. The smaller the time frame of the chart, the tighter I will place my stops. On this trade, I set my stop 5-6 pips away from my entry since that was beyond the resistance line as well as the previous swing high (Bounce #2).

Remember that when we set our Stop loss, this is also setting our monetary risk on the trade. So we also need to consider our trade side in respect to our Stop loss distance.

Setting Limits Within Support/Resistance

Now that our stop is set, we need to focus on our profit target. For our limit placement, we have two objectives:

  • Our limit’s distance needs to be further than our stop’s distance.
  • Our limit needs to be placed within the closest support/resistance (by at least 5 pips).
The reason we want our limit further than our stop is because we always want to try to make more money than what we are risking on each individual trade. This is something we discuss heavily at DailyFX so I will say it again here. We want a positive risk/reward ratio.

And the reason we want our limit to be placed within the closest support/resistance level (by at least 5 pips) is for the exact same rationale we used to open this trade to begin with. We know prices have a tendency to bounce off price levels they have bounced off of before, so we want to make sure that no support/resistance is in between our entry and our limit level. In the example below you can see I placed my limit 5 pips above the swing low (potential support). This gives price a clear path to a profitable trade.

Trendline Strategy Complete

This trendline strategy is one that can be used universally across all currency pairs and time frames so it is definitely a worthwhile style of trading to learn. The logic behind the entry and exit rules is also something that can be tailored to other types of strategies as well. Good trading!



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