Using exit strategy signals in your entry strategy to filter out false signals?

Jake Freeman  

When developing an EA, can you technically use an exit signal in the entry process with a decent success rate? I'm not suggesting to use an exit signal as an entry point, what I am looking into is using my entry signal and then checking it against an exit strategy to see whether the entry signal was viable.

So far I have looked into different exit strategies, but none seem to really fit well to the losing trades.

One of the possible ideas I have had is using the parabolic SAR to check whether it is signalling in the same direction as my EA, then closing the trade when SAR flips.

I have a chandeleir exit indicator that I have been looking at, it seems to help winning signals but only with the winners, the losers often perform worse when the chandeleir is used as a stop loss signal.

I've never worked on an exit strategy, currently the EA only has a basic trailing SL with a breakeven function, I would like to expand on that. Ideally I want a way to engage the trailing stop in a smarter way, so it knows whether the volatility is gone, when it should bring the trailing SL engagement lower in order to close a losing trade in the biggest profit possible or the smallest loss.

Sergey Golubev  

There are two discussion threads related to exit strategies:

Which strategy is best to close the position?
and
Exit Strategy : What's yours?

Which strategy is best to close the position? - How to close profitable positions in the stock market?
Which strategy is best to close the position? - How to close profitable positions in the stock market?
  • 2013.05.29
  • www.mql5.com
Which strategy is best to close profitable positions. Take profit value :) my view : all this  ( type of position, when get a position, take profit , stop loss ,  trilling stop or exit from position ) called strategy
Fernando Carreiro  

Yes, that is quite common to do that. When one signal contradicts another, it is a sign of indecision and higher risk. You can either filter out the trade completely or reduce it's exposure.

When developing a strategy, your first priority should be your exit rules and risk management. Only after that should you consider the entry rules.

Fernando Carreiro  

Forum on trading, automated trading systems and testing trading strategies

Writing a profitable trading bot

Fernando Carreiro, 2022.08.16 15:54

Based on my own experience, I find that the most important aspect of having a consistent and profitable strategy, is how you handle your risk and your money. I would rate the importance of different aspects as follows:

  1. Risk & Money Management (maximum importance and most essential part of all the strategy rules).
  2. Exit rules.
  3. Entry rules (least important).

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EA printing values that shouldn't be there

Fernando Carreiro, 2022.06.10 22:50

As I stated, both at the same time may not be possible!

When I started with MQL, I was already an established software developer with 30 years of experience. But even then, I approached it the way I described. Even with my solid background in C and C++, MQL was not just about coding. It also had to do with the MetaTrader platform and trading concepts, and those were totally new to me.

Many of the strategies I had in the beginning eventually got bashed away by the reality that trading can differ totally from what one thinks it is in the beginning. I came up with very elaborate stuff, only for them to be ultimately thrown in the bin because I was naïve.

As I progressed, I realised that my trusted friend in coding, namely K.I.S.S. (Keep it simple, stupid!), is just as relevant in trading as it is in much of anything else in life. Complex strategies are useless and just distract us from what is really important.

As time went by, my strategies became simpler and my EAs become more refined. However, to my surprise, over time, money and risk management became the central theme of it all. It gradually became clear to me that entry rules were not all that important, but exit rules, risk and money management can make or break a strategy and became paramount for me.

In essences, almost any indicator gives approximately the same signals, given that they all derive those signals from the price action itself. So you might as well stick to the simplest and cleanest of indicators and concentrate on the exits, risk and management of the trades.

With that in mind, I decided that my code should be simple, clean and efficient, and focus on the risk and trade management and very little on the indicators and signals they generate.

This is my advice to you. Learn to code MQL and understand the platform and trading, methodically and properly, because as you do, you might find that your current strategy is going to end up in the trash bin.

NB! My journey with trading and MQL took me years (not months), to get to a level I could be happy with.