Entries vs Exits

[Soultrader 12]

I decided to open a new thread on an interesting topic from:

 

http://www.traderslaboratory.com/forums/market-discussion/206-what-holy-grail-you-2.html#post1081

 

The question is: Which is more important to you? Entry or Exit?

 

Traders get split evenly. There are traders like myself who focus more on entries while other traders focus on exits. I would love to hear your opinion on this topic and the reasons why you prefer exit or entry.

[Follow The Trend 10]

To me the entry point is far more important than the exit point - as they say :-

 

"You need to buy a ticket to win the raffle"

 

If you have not taken the plunge to buy a stock, then how can you make money?

 

Even if I make 5%, 10%, 50% etc and miss a massive rally after selling, I would not be too bothered......a profit is a profit.

[carter 10]

I would have to say the exit is more important. A profit is a profit but you can never get rich that way. Here's a good quote:

 

"You'll never grow poor taking profits... If taking one-point profit in five or siz years is a way to keep out of the poorhouse why not sell apples on the street corner? It ties up less capital." - Wyckoff

[are_mai86 10]

haloo

 

i have problem dunno when to exit after entry..~

[bunkerdoo 10]

I would have said the exit strategy is more important as it dictates the size of the profit or loss. But even more important is the position size taken/money management aspect of the trade, as even random entry systems can be made profitable with appropriate money management rules.

[Trade Up 10]

I also think that the entry point is more important than the exit point.

 

Until you have an entry point, you do not have a position to trade, no position = no potential profit.

 

After taking the plunge to buy a stock (assuming you have bought the right stock at the right time) it is up to you how greedy, or fearful you want to be.

 

Greed = potentially holding on for too long

Fear = the fear of losing, or reducing a profit

 

Fear and Greed are what makes the market go around.

[Soultrader 12]

I also think that the entry point is more important than the exit point.

 

Until you have an entry point, you do not have a position to trade, no position = no potential profit.

 

After taking the plunge to buy a stock (assuming you have bought the right stock at the right time) it is up to you how greedy, or fearful you want to be.

 

Greed = potentially holding on for too long

Fear = the fear of losing, or reducing a profit

 

Fear and Greed are what makes the market go around.

 

Nicely said Trade Up. I have predefined exit target points and stop loss points on every trade to reduce the emotional aspect of trading. This allows me to control fear and greed.

[ant 10]

I trade market development and market structure based on the Market Profile graphic and my goal is to identify trades with excellent trade location and excellent risk/reward. When a market is in a trading range, I would say that entries are more important than exits. For example, I would not want to enter in the middle of a trading range because that offers poor trade location. However, for a breakout trade, I would say that the exits are more important because these are the trades that can lead to a stellar week, month, or quarter. My goal with breakout trades is to ride it as long as the trend is intact. I do not want to exit too early. I do hold breakout trades overnight since these are the best trade opportunities the market offers, IMO. With a breakout trade, the goal is to just "get the trade on." Trade location will improve as the trend progresses.

[Soultrader 12]

Very good points ant. Real money is made by staying in a trend. Although I have strict rules in partialling out on a winning trade, I will always try to hold on to my last portion as much as I can.

 

I consider the first portion as covering commision costs and the last portion as my income.

 

TREND vs RANGE requires different entry/exit strategies.

[torero 10]

I think it's harder to learn to exit properly than entries, because are a few ways to enter (price or indicator signals) but tons of ways to exit (normal stops, percent or dollar trailing stops, SAR, stop loss, etc). I'm still learning to how to stop properly. Psychologically speaking, exits are harder to take than entries.

 

Learning to use a simple stop loss is a major step for any trader. And learning to stay with a trend is even harder for any experienced trader. Even most traders from Market Wizards admit they tend to exit too early.

[Soultrader 12]

I think it's harder to learn to exit properly than entries, because are a few ways to enter (price or indicator signals) but tons of ways to exit (normal stops, percent or dollar trailing stops, SAR, stop loss, etc). I'm still learning to how to stop properly. Psychologically speaking, exits are harder to take than entries.

 

Learning to use a simple stop loss is a major step for any trader. And learning to stay with a trend is even harder for any experienced trader. Even most traders from Market Wizards admit they tend to exit too early.

 

Very true torero. Although I have exit rules of partialling out, I must admit I still exit too fast at times. One dillemma I currently have is based on singles vs homeruns.

 

I have rules of partialling out 3/4 of my position. The problem lies in the last quarter position. After capturing 20 points on the YM, I try to aim for 30-50 points on my last quarter position.

 

The problem is that such moves are the exception and not the norm. Everytime I try to hold onto my last quarter position, the markets will tend to reverse. This loses two opportunities in my opinion:

 

1. Paper profits disappearing.

2. Can not get in on the reversal since I am trying to ride out a trade.

 

However, when I try to exit my last final positon discretionary at +20-30 points, I often miss the big moves of 70+.

 

Just another classic example of trading emotions in play. Greed plays bigger role than fear for me.

[torero 10]

My trades are not that complicated... yet. I have one entry and 3 possible exits: stop loss, target and trailing profit stop, whichever comes first. Although my bias sometimes is the target itself: should I take profit at target or let the market take it higher. Sometimes it works sometimes not. But my limitation of holding it longer is restricted to my inability to be physically there the entire day to babysit it so have to take what is given to me. Having a target gives me a reason to take the trade, but it's also a hinderance to letting it run. A dilemna indeed.

[ezduzzit 10]

Hmm.. an interesting thread to be sure. However, let me suggest that they are equally important and that you do yourself a dis-service to think of them in any other manner. Also, I think it is not really a question of having to buy a ticket to win the raffle as someone earlier quoted.. I mean I assume we are talking here about the "timing" of entries and "timing" of exits, not whether you are psychologically capable of ever pulling the trigger to get into the trade in the first place as I think that is a different topic altogether.

 

If you are a rules based trader (and I hope you are, unless you are truly clairvoyant) then you have specific reasons and locations based upon risk/reward, money management and proximity to support and resistance areas to enter your trade, in addition to your high-probability set-ups. Your exits can also be rule based but I suspect many traders are more focused on trying to bleed the maximum amount of profit out of each trade. Therein lies the rub and the quandry.

 

If you are like Torero and cannot be constantly at your computer to manage the trade and jump out when the going gets rough, then your exits probably have to be strictly entered as formal targeted profit stops or else. However, if you are a full-time daytrading desk jockey then you are probably caught up in either holding a "runner" to grasp that rare and unexpected big final run in price (even though it is with the tiniest portion of your contracts risked in a given trade) or you are like others who move their stop loss up to breakeven plus 1 or better earlier on (giving you essentially a "no risk" trade) and you are letting your whole position ride in an attempt to garner either a fixed amount of profit or else as much profit as possible with the bulk of your position.

 

I think we obsess over capturing those final tail-end profits for two rather obvious reasons. One is greed for the maximum possible profit and the other is to avoid that feeling of loss we get when we get out with our "reasonable" profit only to watch the market zoom much further ahead after we exited the trade. Is a bird in the hand truly worth two in the bush as the old quote said? Should we grasp a reasonable and sure profit and not worry ourselves over those rare instances where we got out too early? Or are our trading lives truly financially dependent upon our participating in all or even most of those rare run-ups and deep declines that go on a little longer than anyone expected? Do we truly need to go after those additional ticks on our tiny "runner" positions even though more often than not we screw up the exit timing and that position eats its way back into our expected profit? Are there really exact and final answers to these questions? Do our lives as traders totally depend on capturing the maximum profit in most instances?

 

Frankly, if we have done our homework on our trading plan, we already know how much profit we need to capture on average each day, week or month to make trading a continuing worthwhile endeavor. If that is the case, and we are capturing an acceptable profit already, do we truly need to drive ourselves nearly bonkers over getting more? At some point the challenge disappears and the stress takes over.

 

Hopefully, most will agree that there are sufficiently good reasons to give both entries and exits our full and undivided attention and not unnecessarily worry ourselves about which is the more important. If we keep allowing ourselves to get caught up in these conundrums they will serve to slowly diminish the pleasure we get from trading to where it eventually becomes just too stressful and we begin to burn-out. If you do this for the pleasure as well as the money, as I do, then give this idea some serious thought before you obsess too greatly over the timing of your next trade, especially the exit.

 

Happy Trading

[feb2865 10]

My following statements are completely subjective. They're based solely on my own experience It’s not the holy grail neither the absolute truth of trading

 

You guys are talking about exits. Please don’t narrow you vision in just that, look at the bigger picture.

 

I struggled for many years with exits. Believe me , I used all kind of strategies, methods, etc. Looking at the bigger picture, I realized one day that not only exit rules but the whole trading strategy, method system whatever you want to call it becomes very much like fingerprints. I could say that exits, as opposed to entries, requires far more practice and concentration. I could say that I ‘expect†the market to reach certain at certain speed, if not I am out. But you could disagree with me. Tell you what, it works for me but not necessarily will work for you. Took me years to find out what really works form me and it’s exactly what I said above.

 

I play the market. I am not at the mercy of the market once I get a position. When I am trading, I become a little arrogant in my own space. I am in this business to make a buck people, not for a charitable cause. The market MUST give me what I want or simply I am out. Will the market care? Of course not. Will I care?. neither. The market is not my friend and I’m not his friend either. Will this work for you?. .probably not But has worked for me for many years to the point I presently trade for the fun of it(yes fun but I will always try to make a buck anyway .)

 

When I lose, I am satisfied. I did the best I could but I understand that trading is a game of probabilities. We are speculators. We expect the market to move in our direction But there’s no guarantee. Everytime you enter on a trade, your stake is at risk. Let your position mature for a period of time but keep your head up. Please draw this rule on your forehead and practice it . It’s a truly game of balance that takes time to master.

 

Either I win or lose, I simply shut down my computer and go somewhere else. There’s plenty of stuff to do besides trading. I don’t care if the market blasted off after I killed my position. Good for them. Good for me that I reached my objective, at least my money is in my pocket, and not in some other’s lad pocket

 

For instance, John Carter has some excellent seminars at CBOT. The thing is, the trader who will benefit the most form his methods is…yes John Carter. After all it’s his baby and that baby spits dollars for him I am sure. Will his strategies work for you?? Maybe yes, but maybe you go with something like…â€ÂI like his strategy but I don’t make sense of the squeeze†Pick what’s work for you and leave the rest to Mr. Carter and his own game. Yes it’s good to have a mentor. But they can only show you the way you have to open the door with your own little hands.

 

After all this years, there’s something I strongly believe will never go out of style: Support and resistance.

 

No matter what your entry/exit method is, the more your get at hand playing these levels, the better trader you’ll become.

 

If you look at one of my charts, you will have in your eyes a truly resemblance of a stack of sliced ham. Yes I slice the market. I pre-arranged everything the night before. I even make a little script on what I expect from the market, including of course, Pre-determined possible entry/exit marks and economic calendar for the next day, in order to keep my ear on the ground. Does it work for me? Yes, more often than not. Will they work for you? You need to find out.

 

Raul

[Soultrader 12]

Very interesting comments guys. A trader clearly needs to understand why is he trading and what he wants out of trading. Feb and Ez... your comments contain strong beliefs on how you view trading.

 

As I gain more experience trading, I appreciate whatever amount of dollars the markets can give me more and more. I am definitely not emotional as I used to be when missing a move. My daily goal is 30 YM points and I am 100% satisfied with getting just that.

 

After all this years, there’s something I strongly believe will never go out of style: Support and resistance.

 

No matter what your entry/exit method is, the more your get at hand playing these levels, the better trader you’ll become.

 

If you look at one of my charts, you will have in your eyes a truly resemblance of a stack of sliced ham. Yes I slice the market. I pre-arranged everything the night before. I even make a little script on what I expect from the market, including of course, Pre-determined possible entry/exit marks and economic calendar for the next day, in order to keep my ear on the ground. Does it work for me? Yes, more often than not. Will they work for you? You need to find out.

 

Good thing you mentioned this Raul. I also firmly believe in this. Two things I can always rely on will be S&R levels or pivots and tape. As long as a trader has these two skillset on lock, with the proper money management one can expect longevity in trading. Its interesting how plain simple methods will never get old.

[ant 10]

Trading based on Support & Resistance would never go out of style because it's focus is on finding where a market will encounter supply and demand. Supply and demand are at the heart of what markets/auctions are all about. However, the art is in determining where supply (resistance) and demand (support) will come into the market. For that, there are as many approaches as there are traders (e.g., TA tools and indicators such as pivots, Market Profile, fibs, moving averages, Elliot Wave, Gann, etc). Most of these tools have nothing to do with determining where supply and demand will enter a market (most are arbitrary equations really), and they only work because they tend to be followed by many traders (i.e., a self-fulfilling prophecy). So I don't know if any of these tools will stand the test of time. Having said that, I am of the opinion that Market Profile and auction market theory do a good job at determining supply and demand. At least it is the most objective and most reliable tool that I have found that works for me.

[drk1t 10]

Both! Like asking which is more important the heart or the liver? I enter a position only because it looks like there is potential to make enough to justify the cost of trade (in and out) and enough to justify tying up the capitol for the time I'm holding the stock and hopefully to make enough to more then make up for losses and keep the lights on another month. I think in terms of percentages and if a trade is going my way I'll let it run sometimes, sometimes I don't, it just depends on what else is happening at the time, once again a percentage of the amount of capitol tied up and at risk. I also will hold over night if I think circumstances justify it. So all in all, I guess the entry and the exit are of equal importance to me.

[protrader 10]

i would say the exit is most important for the fact that capital preservation is one of the first trading rules. if you dont protect it you will not be around very long. and with good exits you can be wrong on more than 50% of your trades and still be profitable.

have a good and profitable day....

[dangermouseb 10]

hmmm... a topic from a while back...

 

I've been developing my exit thoughts about trading strategies and use this to frame:

 

A) I have some analysis that indicates that price is about to do XYZ on a probabilistic basic,

B ) I also have a strategy to take the maximum edge from that probability distribution. This is trade management and includes position size, entry (including scaling in), and exit (including scaling out).

 

Montecarlo simulations show that for a given analysis, the amount of edge taken from the market by trade management can vary by up to 2 or 3 times the best to the worst.

 

In market conditions where a random entry system works (i.e. with good trends going on) then the exit part of the trade management is the most important.

 

In market conditions where a random entry system produces noise the analysis part of the becomes more important.

 

-- DM

[speres 10]

I find a good entry will keep your losses down to a few pips. If you concentrate on the value areas with a good entry, even in the forex markets, and a good understanding of price action you quickly know when your wrong and then you have an excellent rr.... Once you've mastered your entrys and reasons for entry then exits should follow naturally as price usually has a target, then your not likely to be shaken out and miss out on all those pips, that are extremely important in making it as a trader..

[thalestrader 14]

Whether you win or lose, and how much you win or lose is a function of your exits.

Most will admit that two traders trading the same system/method/approach may have two vastly different profit factors.

 

In most cases, the entries are easy, and both traders are taking the same trades. The difference comes in the differing abilities of each trader to do what is easy to say, but difficult to practice - cut your losers short abd let your winners run.

 

I use S/R to exit. But I have long known that taking my entries as I do, if I were instead to use a trailing volatility/ATR type exit, my profits would be larger but my win rate would be lower. I am willing to sacrifice higher profits for the comfort of a better winning percentage. But it is a sacrifice.

 

In the end, it is the exit, not the entry, that provides the larger balance to your trade results.

 

Best Wishes,

 

Thales

[Kiwi 16]

I will disagree with most. The cause of this disagreement is the work I've been doing on systems for short term trading. And considerations of longer term holds.

 

Neither entry nor exit is more important; in general.

 

 

Both depend on what you are trying to capture and thus, for best results, must compliment each other.

 

Example1: You want to capture the big trend. So your entry should be designed to get you in at a point where your stops have a high probability of keeping you in the trend. Your exits will have the same in mind. Your entry, if you'd used a PT/Stop of 1:1 might give a poor profit factor but you don't care if it gets you into the move at a point where trailing stops can work for a long hold even with a 25%-35% win rate.

 

Example2: The classic high probability scalp where you want to win 80% of the time but are prepared to accept a sub 1:1 reward/risk perhaps. Here you don't care if you are in a place in the larger move that is indefensible with trailing stop - what you care about in an entry is that it has a very high probability that PT will be reached before S is reached. In an exit you might just have a target and stop. Or you might aggressively pull the stop to BE+.

 

But in each case it is the combination that delivers the desired outcome - not the entry or exit alone.

[saidy 10]

i would say exit is important becoz any one could enter in to the stock, but on exiting from the stock a person thinks that should i exit now or later.

if cmp is < than cost price= person thinks atleast cost price money should get recovered

 

if cmp > cost price = person think this stock must give times of return.

 

in both the cases exit is important.

[hedonQ 10]

From what I read on this thread I'd say entry vs exit is more about trading skills

than statistics.

 

Entries are probably at the forefront of a trade much more than exits when learning the craft.

It is possible the trading skill of entries are polished before the exits. And therefore entries

become less of an importance.

 

But wait, isn't entry the same as exit but in reverse?

 

Good Luck.

[sevensa 10]

From what I read on this thread I'd say entry vs exit is more about trading skills

than statistics.

 

Entries are probably at the forefront of a trade much more than exits when learning the craft.

It is possible the trading skill of entries are polished before the exits. And therefore entries

become less of an importance.

 

But wait, isn't entry the same as exit but in reverse?

 

Good Luck.

 

No, I don't think so. I think entries are very rarely the same as an exit, but in reverse. Exits are normally very different than the way you enter.