a good read
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.
Forum on trading, automated trading systems and testing trading strategies
newdigital, 2014.05.23 17:02
Should You Exit Your FX Trade On Strength Or Weakness? (based on dailyfx article)
“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!
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.. :)
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?
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"