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That would simply be semantics then. Since we don't know if the trend will continue, they are very good scale out places (since, as you see, there frequently is a pullback after). It defeats the purpose to notice a "potential climax", and wait for the trend to completely change before exiting (waiting for "reversal confirmation"). As I said earlier, my strategy involves position adds, so I do account for continuing trends. Sure, it's actually a mixture of both. Neither party was particularly interested, but this is what I was referring to: my edge is decreased with significant lack of enthusiasm of buyers. This doesn't necessarily mean there will be a top, just like climaxes don't mean a top/bottom.

Possible developing hinge on 6E (Euro Futures). This same formation is on DX (US Dollar Index). The hinge is visible on the daily. This is a 4hr chart.

First, let me thank those of you who have contributed your ideas towards exits. I don't favor "mechanical" stops (scale outs at different predesignated levels), because this doesn't adapt for different market conditions. Determining the strength of waves (as Db said) allows you to take advantage of trendy and congesting environments. However, it's not nearly as easy as taking stops at 10, 20, 30 pts, etc, so this may have something to do with trading maturity. I treat my exits very importantly, so took the time to make a trading plan for exactly what I look for. Yes, good point Kiwi. I am much more willing to exit, sideline, and re-enter than give a move "more room". I'm of the belief that my greatest edge is right at my entry, so my stops are typically pretty small. Given, my specific strategy is designed around this fact. Depending on the volatility environment, this is generally around 1.5 ES. However, I don't hit my stop very often because I generally exit before it gets there. I do admit that having such a small stop involves being able to gauge buying/selling interest very quickly on a fast chart (I use a 3-10s chart), and I'm very willing to re-enter if I have to. I do admit that this strategy Picture attached. As an aside, I do not take all breakouts like this, and this met other criteria (example: the bull failure at the double top). Yes, at times, I will close an entire position at a significant climax at s/r. However, this is generally based on other factors, especially on higher timeframes.

Yeah, I hear they have episodes on some schedule, but then within a week, can produce new ones based on current events. They could have just bet on Obama winning (and had a backup in case he didn't), or truly created two shows for both results. edit: Then again, they poke fun at his grandmother dying, which was Monday. Damn they're fast.

If anyone missed it, it's online already.

Hahaha.. ES 91.5, on a second entry attempt. Also, if you notice, A occurs right at the low of the day (made shortly after open), so I was already watching pretty closely in that area. Buyers came in to buy the lows (thus creating the climax.. high volume = high interest on both sides), and failed. And down we went again...

Yep, in terms of net positions, it's exactly what you're talking about, and in practice, I'm looking to accomplish just that: taking advantage of longer term moves as well as shorter ones. A difference would be that the "longer term position" size isn't set. For example, the last exit was just 1/4 of a "full size" (a default entry size I use). I'll try to also provide some soon that aren't so clean (and you guys are more than welcome to add your own! yes, that's you Mr. lurker). It's easy to cherry pick the ones that "work", so it makes sense to show when it's not as clean as well. edit: This thread assumes readers are pretty comfortable with at least the basics of supply/demand, markets, and potentially auction market theory. If you're not so comfortable with these topics, and are just more interested in learning some sweet ass exit "setups", you'll probably save a lot of time in the long run going here (and the rest of this forum).

Interesting point. Personally, if I were limited to one contract, I would trade 1 real, along with 4 paper. Scale out the first at the first exit you identify, and then keep on trading the paper contracts. I also have a couple position adds in this trade, so you could just keep going in and out at "add setups", but it may be easier to begin with the live/paper combo. (This idea was borrowed from Dbphoenix, if I remember correctly.) The reason I'd do 4 paper is to give you the ability to scale out several times before you're flat. You could do more or less.

Here is this morning's trendy price action on a ES 1m, with annotated climaxes (which were the primary exits for my trading today). Inset is a 10s ES to show the fractal nature of climaxes. You can obviously see them on the 1m, but accuracy is greater when you look "deeper". This is the same chart I traded from today, but cleaned up a bit since it's only the exits we're interested in here. Since my actual setups involve addons, I'll just identify places that I scaled out contracts (as well as stop placement). Fairly textbook climax at (A), and a partial scaleout. At this point, I moved my stops to right above the top blue line, where buyers had trouble getting through before. At (B), I noted a potential climax that I labled that did not develop (orange circle). This is different from the others in that price stopped, but buying pressure was too insignificant to move prices up. An exit here is not a mistake, just premature (as you can see). Interestingly enough, I had a limit stop a tick above high tick of this area before it kept going. That's mostly luck. A real climax did develop later in (B) at the blue circle. Half stops moved to 2nd blue line, half right above swing high after (A). Climax occurred at ©, so a partial scaleout. Half stops moved to swing low at (B), half at swing high after (B). Finally, there was a climax at (D), so partial scaleout. Stops moved to swing low at C (not in halves due to that last move's size). Things get more interesting after (D), where we made the largest pullback in the move so far. We made a higher low, so I exited half at 72.00 (as this possibly signals a reversal, or at least a weakening in the dominate trend). My final exit was at 74.75, where my final stops were hit. Let me bring up that last stop placement at © again. Notice I moved all my stops to the swing low at © because of the move size. This is primarily because I'm not willing to let ES retrace 9 pts on a pullback (which is if it reversed and kept going up). I'm much happier to go to lunch and re-enter later. Another reminder to not think there's anything special about this example.. it's just an example. I encourage others to post their Wyckoff based exits, or other general ideas regarding this topic.

I have seen significantly more voting interest from both sides, with plenty of ignorance to go around. I'm glad to see more people voting, but it does sadden me to see people to vote for superficial or party reasons without actually looking into the different candidates. In other news, Obama is holding around 97% on Intrade.

You do realize that I never argued for inverse relation to the US equities market to Obama's presidential odds? Or even that they're related... at all? I've never heard anyone in the media claim that a Dow up-day is because McCain / Obama's polling well (or doing well in a debate, etc). In fact, the most I've heard is that congestion in the markets may be affected by the election. edit: We may have a level of misunderstanding. I was labeling an "Obama rally" as what I pictured.. the rally of Obama's odds (not recent market movement). Hope that clears things up if we did misunderstand each other. edit 2: looks like you changed your post to be more accurate as to what you intended. 'Sall good.

I'd argue that this could accurately be defined as an Obama rally (and even an uptrend!).

Interestingly enough, Intrade has Obama as a 10:1 favorite. We'll see, we'll see..

Definitely. A good example is a trade I took that I live posted, in the Hinges thread. Link to the trades, and then further down is my exit rationale. As this discussion develops, I don't mind adding other live examples.

As promised in chat, here's my thoughts on scale outs and exits: http://www.traderslaboratory.com/forums/f131/exits-and-scale-outs-4805.html Feel free to add your thoughts as well, Jon (and anyone else interested in this). :missy:

Good points. However, if you treat your exits as "exit setups", it gets a whole lot easier. Successful traders have given up the need to catch every move to its fullest extent. Often, I have to settle for a re-break of a previous S/R level for an exit (which means I gave up profits). In chat, Hlm made the point that for his trading methodology, an exit is an entry, just on a smaller timeframe. In a way, I agree. A 1m climax might be a wonderful opportunity to make a counter-trend scalp trade. I don't trade that way, but in a way, my decreasing my position into a less favorable environment, I'm creating a trade in the opposite direction. Good stuff I'd argue that it doesn't matter, because as I said, this isn't a representation of my entire point (possibly not even a good example). It just happens to show what I'm talking about. So just assume I made it up . Interesting idea, never really looked into this. Please share if you have additional insight into this. I'm not huge on comparing volume on troughs and peaks, but it can show interest, which can help determine what the underlying supply and demand dichotomy is looking like. My discussion of edge and probabilities is more qualitative than quantitative. That is, I don't have exact numbers for a setup (and when event x happens, how it affects my edge). Rather, I know what can affect my edge, and adjust my position accordingly. On a big climax (so, for example, very evident on even longer timeframes), I will be apt to scale more of my position out than on a small climax on my 5 or 10 second chart. More on Climaxes Something that's very important here is why climaxes "work". What is it about volume peaking, and momentum contracting makes for a good exit? It's actually very simple, and makes sense (which is important; you want your trading methodology to make sense logically). Climaxes show a fundamental shift in buying pressure vs selling pressure. Either buyers are content, are taking a break, and/or are taking profits OR sellers simply outmatch buyers. Either way, the peak of a climax is a wonderful exit, leaving time for the buyers and sellers to figure out who's going to win this squabble. Volume will tell you which of the two cases it is (in the above example, on climax I have highlighted, volume decreased on the pullback, and re-entered on the resume... this is telling that another push is probably under way). Remember, climaxes frequently occur on very fast timeframes. Even if you trade off a 1m chart, venture into a faster time chart to spot these. It'll help on exit accuracy. Also note: In my example, exits aren't on "bars". Bars are just cute summaries of continuous price data (which is why I'm a fan of a fast time chart; there's no different in "speed", just in horizontal displacement). Try not to get caught up in thinking what individual bars "mean". This became especially apparent a few days ago in chat, when a setup I took on a 10s chart looked completely different on another person's chart, because our bars were formed starting on different seconds. My setup / trade didn't change, but if I was relying on "bars", it would be vastly different. (Cool trivia: Climaxes are often right after a WRB. Two different views of the market; the exact same result.)

In the Hinges thread, I posted a live trade and elaborated on my exit methodology. To keep that topic on topic and to allow us to continue investigating exits and scale-outs, I thought it would be a good idea to start a new thread. I'll cover my personal exit methodology seen though Wyckoff ideas, as well as the logical rationale behind it. That said, I welcome all feedback and supporting/opposing opinions. My current trading methodology involves position adds and scale-outs. My reasoning has roots in wagering ideologies such as the Kelly criterion. The idea is simple: Bet more when you have greater odds. Relating to trading, you want the most exposure when your edge is greatest; similarly, you want less exposure when your edge is least (and ideally, no exposure when you have no edge). This makes logical sense, but many traders (myself included for a while) failed to see this. Trading is a game of making money, not proving yourself correct. I disagree with the "A good exit is another entry" camp, because I can't say that my edge is always the same. Yes, if you're able to nail moves completely, then keep your all-in / all-out approach. I personally can't, and don't currently know of any trader who can. Let's examine when a trading edge changes. Let's say you enter with a long setup (and many are discussed in this forum), and price moves in your direction but fails to break through a possible resistance area. Couldn't we argue that the new sellers, by confirming resistance, have taken (at least some of) your bullish edge away? This would be a good area to take some position off, because buying pressure is (momentarily) outmatched by selling pressure. I find volume especially important in these areas, because it can help you gauge the interest of the bulls and bears. Price stalled; did: a) sellers sweep in, or b) buyers simply take a break? If you see a rise of volume on the rejection, start looking for the door. What if price did not stall at possible resistance? Then I see no reason to lighten the position. The buyers have been winning, and sellers didn't step in as they did before. In fact, I have position adding setups based on moves like this. Remember, price moves in waves (not bars) and is fractal. The setup you took on a 1m chart could parlay into a 5m setup. Always pay attention to the market on a greater scale. My most reliable and accurate way to exit are climaxes. Here's how I define a climax: A rise in momentium (volatility), along with: A rise in volume Then, a contraction of momentum / volatility (or, a rejection of price) High volume does not mean there's a climax. In fact, some of the biggest moves are on high volume. It's the rejection / stall you're looking for. High volume gives you a head's up that there's a lot of interest. Once you spend screen time watching climaxes, you can catch them pretty quickly. Frequently, you'll see a quick decay of volume. This generally means that buying pressure has lessened, but sellers have not taken over. Many times, this is the making of a pullback before a continuation. If, however, you see volume gaining on the pullback, you might be looking at a reversal (or a pullback on a larger scale). It's not volume you're interested in directly, but volume's effect on price. You'll also see times when volume does not spike before the exhaustion, but price fails to break through a support/resistance level. Many times, price will try more than once, but new buyers/sellers are simply not interested. This is another good scale out opportunity, because the lack of buying pressure is important. Price could likely continue, but our edge not as much as it was when we had buying pressure on our side. So far, I've talked about exits that are pretty close to the extremes. Unfortunately, not ever price action move ends so cleanly with a climax or S/R confirmation. This is where stop management comes into play. To begin with, I use very small stops initially (so importantly, am willing to re-enter if my entry was not clean). Additionally, there's no reason to take a full stop if price is not confirming your entry premise. This is important. I am not saying to wait for the trade to be proven wrong. Rather, get out if you're not proven right. The Phantom of the Pits has some wise words on this topic. So, we're in a profitable trade, and need to manage stops. My first goal is to make the trade riskless (move the stop to break even). This has many psychological and $ implications. Yes, at times, you can get shaken out for break even, and zoom!.. price shoots off. You must be willing for this to happen, and often, re-enter quickly without chasing a trade. I make the trade riskless as soon as price confirms my entry premise. This often involves a x point move, or a breaking of previous S/R. From there, I manually trail stops as price keeps breaking past S/R levels, or establishes new ones. Example: a bull run, and then congestion. I will set stops under the congestion. The more contracts you trade, the more scale-outs you can have, making your trade longer and longer (if this is wanted). As a rule of thumb, the longer term the trade is, the less tight you need to keep your stops. On trend days, to catch the entire move, you will need to allow for pullbacks. In action, I'm frequently scaling out on pullbacks, and then adding to my position as the trend resumes. This is a work in progress, so please feel free to add to my thoughts. My other posts on exits: Live trade exit discussion, the benefits of scaling out. A couple of you have mentioned to me that you like examples (helps solidify the concept). Please understand that this is simply one example, and does not represent the concept in entirety.

Highly, highly unlikely, but technically possible. The difference between 1% to 0%, and 2% to 1% is astronomically bigger. Then again, Japan has theirs at .3%. Unfortunately, I believe this is the wrong move for the Fed. Since we're in stagflation, we do need to tend to a stagnating economy, but also need to watch out for inflation. Flooding the money supply will only make matters worse in the future.

I hope discussion on exits isn't too off-topic, but I'll answer your questions since they were good, and we'll try to keep more on topic. It all depends on what timeframe you're looking at. Yes, your example was a climax, but I would argue it was only a climax on the next bar, when volume was high, but price completely stalled. Regardless, remember that this hinge is primarily on the 10s chart (so a fast chart), and isn't even that obvious on the 1m. Therefore, the traders that influence moves on the 10s are more short term. I do like to use price fractals to my advantage (parlay fast tf entries to longer term trades for bigger gains), but I wasn't convinced on the 1m of a larger bull move, and was largely correct (price didn't break the 58 area for another hour). I look for two distinct and important things in climaxes. First, I want to see a spike in volume (along with a spike in volatility). Then, I want to see a contraction of volatility (i.e., the move stops). I personally trade them by getting a possible climactic signal, and watching price carefully. Generally, I tighten my stops. The first climax I saw on the 10s ES was at 10:01:10 EDT. My stop was at 50 (previous swing high a while back), and I watched for supply to enter the market. Volume (interest) dropped off quickly, so I didn't exit just yet. Buyers attempted to move it back up, and there was another (much smaller) volume spike. Slight higher high, less volume. By now, I'm looking for an exit if it doesn't continue very soon. I moved my stop to 51.25, and buyers tried again (and failed to keep the move going, same story). I scaled my first half out there. You're correct about the second scale-out. Here's exactly what I was looking at (slightly more annotated for clarity): I wasn't trading at the time. Funny how these things coincidentally happen

I don't have time to form a well thought out reply, but to answer your break even thoughts: it may be a negative expectation decision, but: a) It's not that much if you entry is good, and you're willing to re-enter if the conditions warrant; b) It produces a much "smoother" P/L curve over time, which technically allows you to use more leverage in the future.

The idea of scaling out has its roots in wagering ideologies such as the Kelly criterion. The idea is simple: Bet more when you have greater odds. How does this relate to trading? Well, let's say that a setup has x% edge over random entry (assume the setup is actually profitable). The highest advantage you'll ever have, using the setup, is right when the setup occurs (which makes sense). Let's say price then moves 18 points in your direction. Are your odds the same? Probably not. This is where scaling out comes into play. You're simply changing your position to reflect a change in your edge. All's good so far. However, what if your edge is the same (or greater!) after 18 points? Well, using a set price target scale-out system, there's no difference. You're either taking a full stop, or the scale out levels. Using your levels, Jon, what if you shorted, and price entered panic mode, dropping 100 NQ? Well, you'd hit your levels, and be out. Likewise, what if the market came within a tick of your 18 NQ level, and reversed? You'd end up with -4. Since the levels are a bit arbitrary anyways, why would a trader want this? Wouldn't the trader prefer to scale out and exit when market conditions change, since that's the whole reason he/she scales out in the first place? Let's consider an alternative trade management ideology (this is by no means the best, or even exactly what I use). This trader would exit only when market conditions change. A great example of this would be a setup in the opposite direction, an influx of supply/demand near support/resistance levels, a climax, a decay of trend, a break of a support/resistance level, etc. The methodology doesn't matter (as long as it "works"), so don't feel my suggestions are the only thing you could look at. What would this trader now have? When price is really moving, he's along for the ride (taking advantage of panic and the trend). When price stalls "early" (compared to the old scale out levels), the trader can salvage profits. When price fails to perform as it should under the setup, the trader can exit early (avoiding the full stop). In fact, the trader's goal is to eliminate risk, so even if price advances and then retraces completely, a break even trade is the worst case scenario. This is somewhat similar to the idea of trailing stops. Ride the ride while it lasts, and the get out. Unfortunately, trailing stops always give back x points profit, regardless of what price is doing. A trader scaling out at a climax could get pretty close to a top/bottom (though it may keep going afterward). Hope you have a good weekend.

I didn't really explain since I was in the trade: My exits were based on climaxes, supply entering the market, and resistance holding. Look at 10:01 EDT on a 10s ES chart, and you'll see the climax. I don't exit until I see a price rejection, which happens shortly after at around 55 ES. The 58.25 exit was after the 3rd failure at 58.75 on declining volume. The final exit was the newly formed congestion area break down. Comments and feedback welcome.

10s ES (just now), long: edit: Price pulled back, +.25 ES, waiting for midpoint bounce (if it happens). edit: Bounce (entered possibly late, but wanted to see volume come in. 46.5 fill) edit: -.25 ES. I'll give it one more bounce if it does.] edit: Long 46.25 (same story). Volume seems to be rising during up thrusts, and declining in these pullbacks. Stop is tight. edit: Trade update.. 1/2 position out @ 54 ES. Stop on rest @ 50. edit: ES 1m chart edit: 1/4 out ES @ 58.25. edit: Flat ES @ 55.75.

Yeah, that's how I've always treated news based PA movement like this. Since it makes sense for volatility to decrease nearing news (traders are already in positions or are already out), it also makes sense that price might form a triangle. If anything, a break from the triangle might signify how the news is received, but any trade is chasing the reaction.

Very nice. Thanks Db for questioning and raising ideas so eloquently. And a question for you: In your experience, how much does news affect the effect of hinges (or rather, probably more appropriately, affect what the hinges represent concerning supply/demand)? That is, generally, do news based market moves often follow the technical price movement predicating them? Example: ES 1m from today, breaking at 3:15 EDT.