I Really Need a Way to Get Out of the Trade

[b4gt 10]

Please dear traders I need your help. Since I am under capitalized and still struggling to learn I keep my positions small. So the maximum amount I put per position is 500€. I have found my self gaining as much as 100€ (that is 20%) from those 500€ and the next day my stop gets hit and I get out with 4€ profit :doh: or even loss. That's not that bad since these stocks after they hit my stop are on their way to meet the volume chart.

 

So I think I have two problems.

 

One is I don't know how much should I expect to gain realistically from a trade. If the whole market is going down and a few stocks are rising, are they to be expected to continue rising or I should be grateful that I survived one more day and take the money and run?

 

The other one I am struggling to understand is where to put my stops. I am trying to simulate trading by playing historical data bar by bar. A typical pattern that I see is that after I enter a trade, it goes 2-3 days my way and then it kicks me out with a few cents of profit or a heavy loss. After that sometimes reverses again and continues it's way up.

[BlowFish 10]

Hard to say without some chart examples. A common way of dealing with stops is to use market structure. Hide the stop a few ticks behind the last swing high swing low before your entry.

[b4gt 10]

Here is a recent example. I got into this trade at 26 June @14.99€ and my stop was hit at 10 July @15.26. To this one I invested the sum of 994.61€ and got back in return 999.52€. That means 4.91€ profit. The day before after the close I had something over 75€ profit. This I consider a fair trade since at least I didn't record any loss.

 

 

The reason that I put the stop loss at that point is because I was watching the rest of the market going downwards and I thought that if it was going to fail with such a big candle then it deserved to die.

 

This thing has happened a few times so I would like some advice how to maximize profits in such conditions?

[bakrob99 11]

Don't get into a trade in the first place without having a target in mind. Then trail your stop behind the Swing Highs/Lows after you are 50% towards your target.

[DbPhoenix 42]

Please dear traders I need your help. Since I am under capitalized and still struggling to learn I keep my positions small.

 

No offense intended, but if you're undercapitalized and still struggling to learn, you don't need to keep your positions small; you need to stop.

 

Develop a consistently profitable trading strategy through research, study, and simtrading. Then go live in increments. Otherwise you're just wasting your time and your money.

[TAvoidance 10]

If the charts are turning against you then don't you think your analysis must be wrong?

The amount you should expect to make from a trade should be part of the reason you enter it. You should have a target in mind and take the trade only on the merit of risk:reward and probability of the move. The moves in prices you are referring to are sometimes called retracements.

 

you seem to have a nice bit of money to play with there ( a lot more than me lol) so I suggest you do a bit of research on price action (google it) and read a book called mastering the trade by john carter

 

You will regret it if you lose your money before you've given yourself a fighting chance of actually making money

[b4gt 10]

They don't turn immediately against me. They usually go in my direction and give some profit before they turn against me. The problem is how much profit is enough. I have read the John Carter's book and Suri Duddella's book and Alexander Elder's book and many websites around the Internet. My main confusion with what they describe is if they can be applied to day trading, swing trading and if there is any difference.

 

@DbPhoenix

Unfortunately I am the kind of guy who must shoot his foot to learn to operate a gun. If I stop I will not learn. I study so I will not blow the foot. The link you provided has many useful things. I already am applying some of them.

 

I have an entry strategy. I want to find an exit strategy. I thought that a good strategy was to trail stops and let the market take me out. I used to trail them two days back and didn't follow that strategy meticulously. The only unbreakable rule is "Once the stop has been set it never goes back. Only forward or stands still". Now I see that this is inefficient. I didn't believe that setting targets is a good idea because every guru says "Let your profits run". It seems I was wrong. What should be done when the target gets hit? Should I get out? Tighten my stop? I don't like the idea of scaling out or adding to positions because that would confuse my record keeping.

Edited July 17, 2009 by b4gt

[traderallen 10]

on swing trades (3 to 5 days) I have found a % change exit works best. From my entry price when the price moves 1.5%, move stop to break even then lock in a 2,5, and 10% profit. daytrades are different. AB

[cuttshot 11]

b4gt,

 

There have already been some good responses to your post. I would agree with some of the earlier responses in that you need to have a plan before you get into the trade. That plan starts with having a system that tells you where you are going to get in and then where you are going to place the target and stop. If you wait until you are in the trade before you decide your exit strategy, you are going to be influenced by other factors (emotions, direction of the overall market).

 

One indicator that might be useful in determining your targets and stops is an ATR (average true range). Typically the default length setting is 14. This could give you a starting point for your trade profile. For example, you could target 2 times the ATR. Obviously you will have to do some testing on the different markets you are looking at to determine the settings for the ATR (2x atr for target? 3x?).

 

You will also want to come up with a stop management plan for the trade. You might decide that once the trade goes into profit by 1x the ATR value you move the stop to break even. This way you have a road map to guide you through the trade.

 

The only way you will see consistent results is to have a plan in place and stay disciplined to that plan.

 

Hope this helps.

Cuttshot

[bakrob99 11]

Here is a recent example. I got into this trade at 26 June @14.99€ and my stop was hit at 10 July @15.26. To this one I invested the sum of 994.61€ and got back in return 999.52€. That means 4.91€ profit. The day before after the close I had something over 75€ profit. This I consider a fair trade since at least I didn't record any loss.

 

 

The reason that I put the stop loss at that point is because I was watching the rest of the market going downwards and I thought that if it was going to fail with such a big candle then it deserved to die.

 

This thing has happened a few times so I would like some advice how to maximize profits in such conditions?

 

If you are going to hold positions overnight - then you need to have your stop considerably further below the price action than shown on your chart. You put your stop loss at a point which is commonly support and a good place to enter long. If you can;t afford to have aa bigger stop - then REDUCE YOUR SIZE and TRADE SMALL until you learn to place your entries and exits at the right place.

[natedredd10 10]

Unfortunately I am the kind of guy who must shoot his foot to learn to operate a gun.

 

No..you are very fortunate as far as an initial mindset goes with this line of thinking.

You are going to shoot yourself learning there is no way around it, all you have to do is not shoot yourself in the head as you learn and end the game. You also just have to stay in the game long enough for your self inflicted wounds to heal and not give in to the "pain". You will either learn or you won't but at least you will give yourself a shot.

Stops below/above a swing low/high is about as good as you can expect right now.

Being put on tilt because of a single loss is something that takes practice and gets less and less the more you are put on tilt. You can read all the psychology nonsense you want but the only way to train your brain really is to lose money many many times when you think you are correct. Almost any kind of gambling that you can gain an edge in is better than markets because of the cost..micro sports betting account, micro poker account..

My niece is due in the fall...As soon as she has a concept of money I'm going to start training her to be a trader. Put a small amount of glue on the tail side of a coin to make it unfair, she is always heads...Give her 200 bucks in a piggy bank that she can only bet vs me in this unfair coin game in her favor and drive her nuts with random streaks betting 10 cents a flip...

[AmCan1 10]

This is an interesting thread. It is talking about how to exit a trade, which in my humble view, is the 'artsiest' part of trading. One of the posters said that he doesn't want to scale out because it complicates his record keeping. No offence, but that seems like the wrong reason to make, what I would consider, a very important trade decision. If you want to simplify the record keeping, enter them as seperate trades. That's like saying, I don't want to backtest because it takes too long.

 

I backtest a lot. I use tools to do so and track my trades in a way that give me meaningful results. Then I am in a better position to craft a tradeplan, which would include my means of exiting a trade. Typically, I'll exit at a fixed target that I have established as having good odds of achieving (based on my backtesting), and then I'll either go for an even larger fixed target on part of the remaining position and/or trail a stop with the rest.

 

I use simple trailing stop strategies that are dynamic, not static. In other words, I want to work with the current market volatility vs. an artificial parameter that might not have anything to do with current market conditions. So for example, rather than trail a stop behind some sort of time limit (2 days back, for example), I will work around the current swings, or trail some sort of momentum indicator, or something like that. If I get bumped out of an extended move prematurely (lets face it, there's alwasys a tradeoff between a stop that is too tight and a stop that is too loose, and you'll never get it perfecty right every trade), then I'll look for some sort of chance to get back on board and renter the trade based on the rules that my very robust tradesystem allows for. I don't need to squeeze every pip or tick out of every move. I just want the high percentage meat and potatoes part of the move. I then post my trades in my spreadsheet and track my results so that I can fairly assess my trading, objectively. From that I learn, gain experience and confidence and my trade exits improve over time.

 

One thing for sure is that I want to know how I will exit a trade before I even get into it. I also know that it will not be perfect and I am at peace with that.

[EsotericRule 10]

b4gt...if you are not on a trading floor, scrounging for 1/4s of a point, then you are a speculator. New speculators using a yearly chart, rely on daily, 2 day and weekly readings. When using a daily chart, new speculators use 10min, 30min and hourly charts. Those are basics for a new speculator.

 

Using common indicators on common settings will result in common (and less than common) results.

 

Use bollinger bands set to .8 deviation to show you when an issue is trending and where. You can use this as a simple entry, protective stop, and end of run setup.

 

Use (and get creative) with the so-called 'fibonacci' extensions and retracements. 95% of traders use them incorrectly, thus my admonition to get creative.

 

What was the reason to buy/sell? Was the price action stronger/weaker than that of the index and group in which it trades? Was there a rare event? Was the issue making new weekly highs or lows? Historic highs or lows? IOW...did you have a plan before you even got into the trade?

 

As you are new to speculation, remember - the issue is not about picking tops and bottoms...its about retaining profit. Profit may not always be right, but its never wrong.

 

PS - it is not a crime to be under capitalized. I started out being undercapitalized and playing around with penny stocks. I survived by taking profits when they occured and ran 2k to 50k in a year with two good picks, 7 so-so picks and 15 duds. Don't marry any position, date it for awhile and move on. Nothing keeps you from coming back to an old flame if you leave on good terms.

 

PPS - study a bunch of 1 year charts, set to the daily time frame, and without any indicators. See if you can find similarities in any of the patterns.