Exits Are Entries, Just Upside Down

[wasp 10]

  Kiwi said:

A good question. And the answer is ... drum roll ...

 

because the purpose of an entry is different to that of an exit. :crap:

 

Not in my opinion.

 

  Kiwi said:

At least, that is how I treat them. I enter when I have a high probability that a move will continue in the direction (and magnitude) of my target before it falls back in the direction (and magnitude) of my stop loss. So an entry is about probabilty*magnitude of target move minus or divided by probability*magnitude of loss move.

 

An exit on the other hand has different aims. My exit is essentially based on a high probability that the planned forward motion is ending (but much lower than the probability required for me to enter).

 

I take (repeated) chunks out of trends so my entry is with the trend, has the above probabilities and is taken cautiously. My exit is "against the trend", doesn't care if there is trend continuation afterwards (I'll either catch it or not) and is taken with the enthusiasm of a long time profit enjoyer.

 

That is the difference between I and most others as, as shown in the chart, I am not willing to allow the move to continue after I have exited my position, plus, I want to maximise my profits throughout so no scaling out.

 

My original reasoning for the thread was the comment on Jason's journal about watching the market continue without you and IMO, there is no reason you should let this happen.

[wasp 10]

  jasont said:

For me the best answer is because you can possibly take more than 10 points out of a 10 point move. We have all no doubt seen big trending days, lets say its a trend up day. Say you enter the market at 1130 and we begin by moving up say 6 points in the initial mark up/buy up/momentum move. At this point you see some signs of a pullback and know from past experience that a small pullback is likely before continuing higher.

 

Instead of holding on through the pullback that you feel is likely to be nothing more than a small retracement though nothing is certain, you decide to take profits at 1135 for a gain of 5 points. You then wait for the pullback you were anticipating and identify the point it will likely reach. Say it comes back 3.5 points at which stage you enter again maybe at 1133. The market then continues up to a resistance point it cannot break at 1140. You take profits at say 1139.

 

Holding on through the pullback would have netted you a gain of 9 points. The risk of holding on was the possibility of netting nothing should one leave their stop at b/e waiting for resistance to be hit. I'd imagine some sort of trail would be used though however for this example we will leave it at break even whilst waiting for resistance to be met. Now the risk at the peak of the initial move up to 1136 was 6 points as one left their stop at break even. I'm assuming that is larger than most accept on a regular stop point.

 

Now the trader who took the initial gains at 1135 and then entered again at 1133 to take the next exit at 1139 has netted 11 points. At the same time this trader has risked their initial stop amount up front, and then when entering again at 1133, would risk the normal stop amount again. This trader's risk however is that they miss the following move should their plan not permit them to re-enter.

 

The above is just a theoretical and can be skewed for the advantage of the trader who buys at support and holds until resistance or can be skewed to the trader who buys, takes an exit and buys again.

 

In all honesty it really comes down to the trader personality and their style of trading. Can I suggest that we possibly put up ideas for traders (such as myself, though I currently feel I have a good solution I am building) in ways to fine tune their exits?

 

I have gone with something simple for the moment which may require more work however I will suggest it anyway. For a way to take the most out of a current move, trailing the stop according to the previous candle low/high seems pretty good.

 

The plus side to this is that during mark up phases we shoot up/down pretty quickly without breaching the previous candle's high/low. We often contract in candle range toward the top/bottom of the current move and that often allows the stop to be brought up in close proximity of the actual top/bottom.

 

The downfall of such a way to exit is that during choppy markets one can get taken out pretty easily. Therefore the ability to pick up on choppy circumstances is necessary to keep one out of unfavorable markets. It also requires one to have a good entry plan. A breakout model, though I don't trade breakouts, may not gather many points as often half a move is made prior to breakout.

 

Any other guys willing to offer suggestions for exiting methods to other traders?

 

I think, as you point out, it is a question of personality and requirements. It also depends on your style and timeframe. I couldn't view firewalkers 1minute chart and see a way to catch the whole of a big swing unless I was trading from a 30minute chart.

 

Trailing is a good way of catching as much as possible without giving too much back but again, its personal preference.

 

My view is posted in my reply to Nine and I trail via S/R and I am all in until I get an opposing signal. I am happy with the win/loss ratio and getting stopped out early if need be but I am an 'all or nothing' type of person. No point fighting that, just merge my personality into my trading.

 

Things are slightly different for me as FX is 24hr so I can ride it back and forth and not worry about opening gaps as you emini traders have too.

[wasp 10]

Firewalker...

 

Both your charts are 1minute charts and whilst I appreciate the method stays the same, in order to get the whole range from a day, IMO, you cannot trade of a 1 minute chart. In order to swing the bigger moves, you'd need a larger view so if you are looking to get me to answer how you would (from a 1minute chart), then I can't.

 

From that timescale, I would be looking to take more trades. same style, but not to catch the whole day in one go.

 

Flip to +30min, then its a whole different story..........

[Bearbull 10]

  wasp said:

Firewalker...

 

Both your charts are 1minute charts and whilst I appreciate the method stays the same, in order to get the whole range from a day, IMO, you cannot trade of a 1 minute chart. In order to swing the bigger moves, you'd need a larger view so if you are looking to get me to answer how you would (from a 1minute chart), then I can't.

 

From that timescale, I would be looking to take more trades. same style, but not to catch the whole day in one go.

 

Flip to +30min, then its a whole different story..........

 

Like your style of trading Wasp, simple (not to say it is easy;) ) but highly effective. I have been making attempts to steer newcomers to simple way of illustrating price action for a while now, Wyckoff kept it simple enough (Dbphoenix also made a concerted effort) , but the mere mention of Wyckoff make a few in here breakout into rashes, mostly those who love to engage in bar by bar analysis and bamboozle with lots of jargon:)

 

Anyway you have aroused my interest in GBPJPY, have no particular expertise in this field, have ony dabbled some in GBP/$ but for most part the Index futures have kept me busy enough.

o.k so your strategy revolves around noting support/resistance levels on 4hr charts and then zooming into lower time frames for entry/exit with the aid of trendlines.

What is the minimum TF you go to, 15min/30min,

Also have you experimented with say, moving averages, oscillators etc for fine tuning entry/exit.

Do you look at Volume at all, realise the real vol is not there on forex, however folks do take into account tick vol.

[wasp 10]

I'm going to answer over here http://www.traderslaboratory.com/forums/103/trade-discussion-and-analysis-3846-83.html#post49315 so as not to take this thread off course.

[Phil Mibbutz 10]

  wasp said:

... I am not willing to allow the move to continue after I have exited my position, plus, I want to maximise my profits throughout so no scaling out.

 

No-one really wants to see a move continue after they've exited, but equally, no-one can ever hope to maximise the potential gain from every trade. After many years, I reached the stage of not caring too much, and accepting that taking a profit isn't a failure.

[wasp 10]

  Phil Mibbutz said:

No-one really wants to see a move continue after they've exited, but equally, no-one can ever hope to maximise the potential gain from every trade. After many years, I reached the stage of not caring too much, and accepting that taking a profit isn't a failure.

 

No, a profit isn't a failure but I see no reason not to try and max out every move.

[Phil Mibbutz 10]

  wasp said:

No, a profit isn't a failure but I see no reason not to try and max out every move.

 

As always, it depends on your style of trading, but in my case not trying to max out every move, a) reduces stress, and b) gives me more time to look for another trade that may have a better risk/reward factor, and/or do something else.

[wasp 10]

  Phil Mibbutz said:

As always, it depends on your style of trading, but in my case not trying to max out every move, a) reduces stress, and b) gives me more time to look for another trade that may have a better risk/reward factor, and/or do something else.

 

I think that is the case of difference between a lot of traders and just why there is no perfect way. Our own desires, requirements, needs and personalities are personified into our trading and whereas I am only happy exiting if I think it justifies a reversal/entry, others are already out and up the pub.

 

Yet, the original query of Jason's was how to attain the best from any move with minimal risk yet maximum reward. In my view, the best way to not miss a thing, is to get the exits and entries to match like a non-bleached blonde!

[Phil Mibbutz 10]

  wasp said:

get the exits and entries to match like a non-bleached blonde!

 

IS that Plato or Aristotle?

[firewalker 10]

  Phil Mibbutz said:

As always, it depends on your style of trading, but in my case not trying to max out every move, a) reduces stress, and b) gives me more time to look for another trade that may have a better risk/reward factor, and/or do something else.

 

Guess it's all down the personalities! For me, trading less, and staying longer in a trade means (a) less tress and (b) more time to do other things

 

I know myself... by exiting for little profits, I'd be looking for another trade far too quickly, so it's also a protective measure. Especially after I scaled out and moved my stop to breakeven the 'trade management' is much more relaxing than the work to pinpoint the entry without getting stopped out.

[sdoma 10]

I think that you need a disciplined and proven exit methodology so you can assess a trade's risk/reward ratio before you take it. I base mine on the nearest attracting structural features. So, for example, if we've exited value and we're heading towards the high or low of the day and I'm in the market, I am looking to take off my trade at that point at the very least. This allows me to assess R/R and not get myself into what my risk manager calls 2 star trades.

[firewalker 10]

  sdoma said:

I think that you need a disciplined and proven exit methodology so you can assess a trade's risk/reward ratio before you take it. I base mine on the nearest attracting structural features. So, for example, if we've exited value and we're heading towards the high or low of the day and I'm in the market, I am looking to take off my trade at that point at the very least. This allows me to assess R/R and not get myself into what my risk manager calls 2 star trades.

 

You've got yourself a risk manager?