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brownsfan019

Measuring Strength of a Move Once in a Trade

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I'm sure I've mentioned this here before, but the hardest part for me as a trader is seeing a trade move substantially in your favor AFTER you've already exited. Today on the ZN was a great example. I literally shorted near the HOD, exited for my standard profit and then proceeded to watch it plummet.

 

I would prefer to not turn this into a 'that's the game' philosophical discussion, but rather a discussion on how you measure the strength of a move once you are in a trade (if you do at all). Just curious to hear what others might be watching when in a trade to see if it's time to exit the trade or maintain a position.

 

Ideas I've tried/used/contemplated previously but was not confident in the results at the time:

  • Indicators that attempt to measure strength, velocity, etc.
  • Volume
  • Pit noise

The ideal situation of course being when you can recognize when to be nimble and exit trades based on your predefined parameters or when you can just let it run for a bit more than normal.

 

Also - I won't chastise anyone if they discuss a favorite indicator of theirs. I know it's taboo around here to discuss the evil, after-the-fact indicators, but you are safe here. ;)

Edited by brownsfan019

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BF surrendering to indicators ??? my, the World must be changing.

 

 

Here's a little "indicator" that might help:

 

set the look back to 2 bars,

if the price never closed beyond the 2 bars, there is really no reason to exit.

(of course you have to tune to a resolution that does not give you the noise,

or increase the "look back" so that you don't get taken out by a spike)

 

http://www.traderslaboratory.com/forums/f46/scalpers-hl-bracket-sound-6084.html'>http://www.traderslaboratory.com/forums/f46/scalpers-hl-bracket-sound-6084.html

 

11041d1243739733-scalpers-hl-bracket-sound-scalper_hl_bracket.jpg

 

 

Hope the idea helps

 

http://www.traderslaboratory.com/forums/f46/scalpers-hl-bracket-sound-6084.html

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I use elliott wave analysis. it helps you determine the trend on every time scale and gives you price targets for reversals. I trade on 15min, 1hr, 4hr and daily charts. The scale at which the move main move is occurring greatly determines its length. The guidelines of the wave principle are also excellent help. it's all a matter of trading based on what is most likely to occur.

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Once in a trade, I monitor for continuation by using profile shape, volume, market confidence/tempo, and ability (i.e., ease or difficulty) of market to trade through support/resistance levels. I don't exit at pre-defined point profit levels. I gauge the odds of continuation and lighten up or exit completely if the odds decrease significantly based on what I look at. My exits usually coincide, but not always, with key reference areas.

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BF surrendering to indicators ??? my, the World must be changing.

 

 

Here's a little "indicator" that might help:

 

set the look back to 2 bars,

if the price never closed beyond the 2 bars, there is really no reason to exit.

(of course you have to tune to a resolution that does not give you the noise,

or increase the "look back" so that you don't get taken out by a spike)

 

http://www.traderslaboratory.com/forums/f46/scalpers-hl-bracket-sound-6084.html'>http://www.traderslaboratory.com/forums/f46/scalpers-hl-bracket-sound-6084.html

 

11041d1243739733-scalpers-hl-bracket-sound-scalper_hl_bracket.jpg

 

 

Hope the idea helps

 

http://www.traderslaboratory.com/forums/f46/scalpers-hl-bracket-sound-6084.html

 

Tams - just looking for some ideas, maybe something will spark an idea on my end. I'm not averse to indicators, but prefer to have 'cleaner' charts. To each his own though.

 

 

Once in a trade, I monitor for continuation by using profile shape, volume, market confidence/tempo, and ability (i.e., ease or difficulty) of market to trade through support/resistance levels. I don't exit at pre-defined point profit levels. I gauge the odds of continuation and lighten up or exit completely if the odds decrease significantly based on what I look at. My exits usually coincide, but not always, with key reference areas.

 

Interesting ant - pictures are worth a thousand words! ;)

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BF,

I trade treasuries so I'm showing what I saw on the 5yr at the time. This is from an MP perspective but the point I'm showing is the increasing separation of price from the developing low value area which shows continuation. Its possible that this kind of indication may be simulated by a MA of some value.

9-16-6.thumb.png.c69ee0e3e1b903e1eec84d8c396aa567.png

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Interesting ant - pictures are worth a thousand words! ;)

 

See attachments for ES trade examples for today (9/16) and monitoring for continuation based on profile shape and volume. An elongated profile and higher volume indicates odds of upward continuation.

 

MonitorTrade.thumb.GIF.465af336a768d4c8214b8bc9c51e88ba.GIF

NYSE-Volume.thumb.GIF.8cad9dff300e11e5d6f62466b525b117.GIF

 

EDIT: One other thing about how I monitor for continuation. I also look at market structure. For example, the fact that a market is one-timeframing higher will help keep me in a trade longer. Also, if a market is moving higher like today, and we get a poor high (i.e., no selling tail), that would also keep me in the trade longer because my expectation would be for the high to be taken out.

Edited by ant

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hey ant,

 

could you be more specific about some of the ways you determine market tempo and the ease of the market the break a resistance/support?

 

thanks

 

No, I can't. Market tempo or moving through support/resistance levels is not something that you can measure. It's a feel for the market that comes through experience from watching the markets. It's a feel that the market is not making sufficient progress in it's price movement for all the effort that it's putting in.

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BF,

I trade treasuries so I'm showing what I saw on the 5yr at the time. This is from an MP perspective but the point I'm showing is the increasing separation of price from the developing low value area which shows continuation. Its possible that this kind of indication may be simulated by a MA of some value.

 

Interesting chart/idea ochie. I do not use MP in my trading, but the idea behind it could be something to work with even if using some MA. From there it would be a matter of measuring the move in comparison to the MA to signify take your profit and go or let this one run a bit.

 

This is what I was talking in terms of sparking ideas. Your post hit home b/c it's an idea that I can see and understand right away. Probably from my times of using MA's as the holy grail during my infancy in trading. ;)

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Just ideas...

 

Maybe use a Keltner Channel and if your move makes a break outside of it give it room to run, else take a pre-specified target?

 

Personally what I do (because I have struggled with this EXACT question for so long) was to just target 2X my initial risk and be done with it. I just found that it was more consistent with me getting out with profit (and usually more of it) than waiting for some lagging indicator to tell me that price was exhausted. Did I miss out on some huge runners? Sure... But I felt that I made up for it by hitting more "singles" if you will than 1 home run.

 

Great discussion though. I'm excited to see what other ideas spark up.

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... I'm not averse to indicators, but prefer to have 'cleaner' charts. To each his own though.

...

 

 

I always tell people, I don't care if you call yourself "price action trader" or whatever,

if you can read price, you don't need anything; you can even see the volume without the volume histogram.

but if you can't read price, there is no shame in putting a moving average on the chart.

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First, I'd like to thank Brownsfan for starting a thread on an excellent topic - Exits. This post may appear to be a little off-topic, but I do think that it is relevant, and speaks to the importance of riding the big market moves. Holding on to a winning trade as long as possible is something that I work on everyday and is critical to my bottom line.

 

If a trader is able to read the market through price action or whatever, why can't the trader use the same approach to determine their trade exit? Traders love to discuss entries, but then once they enter a trade, they relegate the outcome of the trade to the market - they either get stopped out, as opposed to proactively assessing risk and exiting on their own, or they exit at predefined profit targets so that they no longer have to think anymore as if the trader's job is done after the entry. IMO, once you enter a trade, that's when the real trading starts. The entry is important too, don't get me wrong, but the exit is just as important. You can have a great entry, but with a poor exit strategy you can still lose money on the trade.

 

I am a firm believer that in order for a trader to be successful over the long term, a trader has to be able to ride the big moves when it is offered by the market. Otherwise, it will be tough to make any real money in the market. Here is how I view it. The outcome of any trade can be lumped into any one of the following categories: big loss, small loss, breakeven, small win, and big win.

 

  • The breakeven trades don't hurt you.
  • The small losses are offset by the small wins, generally speaking.
  • The big losses hurt psychologically and financially, and could wipe out many winning trades - you have to avoid these!
  • This leaves you with the big wins, and how the real money is made, IMO. They don't come as often as we'd like, but you don't need many of these to do well. Hence, you have to ride your winners!

Obviously, this is easier said then done, even if you're able read the markets. However, if you can't read the market and you rely on technical indicators to trade, then it's going to be tough. Period. It's OK to use technical indicators as a tool or crutch provided that you understand the markets and have a sound framework by which you view the markets.

 

Now, I am also a strong believer that just like we read the market to enter a trade, we should also let the market tell us when to exit. Here's why... If, for example, you use a 3 point stop or so in the ES, which really isn't a big stop at all most of the time, it'll be tough to make money taking 1 or 2 point profit (i.e., arbitrary profit targets) over the long run. I think that it's this mentality that keeps most traders around breakeven or net losers. I think it would be better for the trader to at least scale out right before support/resistance levels then use arbitrary profit targets. It's amazing how many new traders get fooled by system vendors that have a high win rate taking a point or less profit in the ES. That is not a viable long term strategy.

 

No approach is going to be perfect all the time, but the focus should be on what works best over the long term. It's about the probabilities and the outcome of trading a large number trades over the long run, not the outcome of a single trade. I like to grade my trades by looking at the daily swings of the markets I trade and determining the percentage of those swings that was able to take out of the market. Anyway, those are my thoughts and my opinion on riding winners, which has shaped the way that I trade. Again, sorry for the off-topic post.

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Ant, Hope this post doesn’t take us seriously off topic but -----Had your post started with a description of the type of system your exit method goes with then it would have credence. Your advice to hold for the outliers is absolutely perfect – but only for certain limited types of systems. For other types of systems it would be absolutely disastrous. System dependent 1 or 2 point profit in ES can be a viable long term strategy. As I have posted elsewhere, generalized discussion of an exit method is useless. All exit methods, wins and losses, must be matched with the type of system. (btw same goes for optimal sizing too – it must be matched to the system)

 

Good points about ‘grading’ ones trades. A long time ago, I committed to ‘grading’ my performance by how much I took from what was available. It’s almost unreasonably stringent. It’s humbling too… but it’s my way of making sure I don’t settle for mediocrity…

 

bf, Back on topic, “f-’in anything can happen”. The systems that are pressed at the cusp of “stay / no stay” may or may not have sturdy enough ‘price action’ patterns to indicate how much run a move is going to have. Adaptive trailing stops may be indicated. Also, well placed ‘trend’ lines can keep you in for the nice runs (… keeping in mind these same two tidbits would be plain stupid to use for many types of systems.)

 

Not many traders are into this but J.M. Hurst, etc. sees the markets as a summation of cycles. Note - This approach is seriously complicated (even compromised) by the individual cycles having variable ‘power’.. but if you watch the cycles of an instrument on about 12 different ‘timeframes’, sometimes you can see a quorum of currently and due to dominate cycles line up getting ready to ‘sum’ enough to move the odds of a strong move a little bit in your favor. hth

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Ant, Hope this post doesn’t take us seriously off topic but -----Had your post started with a description of the type of system your exit method goes with then it would have credence.

 

Hi zdo, take a look at the following thread that goes into some detail on my trading strategy. In short, my trading style is very similar to what's described in Markets in Profile, which I've learned mostly from Jim Dalton.

 

http://www.traderslaboratory.com/forums/f6/trading-market-profile-6605.html

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Ant, Hope this post doesn’t take us seriously off topic but -----Had your post started with a description of the type of system your exit method goes with then it would have credence. Your advice to hold for the outliers is absolutely perfect – but only for certain limited types of systems. For other types of systems it would be absolutely disastrous. System dependent 1 or 2 point profit in ES can be a viable long term strategy. As I have posted elsewhere, generalized discussion of an exit method is useless. All exit methods, wins and losses, must be matched with the type of system. (btw same goes for optimal sizing too – it must be matched to the system)

 

Good points about ‘grading’ ones trades. A long time ago, I committed to ‘grading’ my performance by how much I took from what was available. It’s almost unreasonably stringent. It’s humbling too… but it’s my way of making sure I don’t settle for mediocrity…

 

bf, Back on topic, “f-’in anything can happen”. The systems that are pressed at the cusp of “stay / no stay” may or may not have sturdy enough ‘price action’ patterns to indicate how much run a move is going to have. Adaptive trailing stops may be indicated. Also, well placed ‘trend’ lines can keep you in for the nice runs (… keeping in mind these same two tidbits would be plain stupid to use for many types of systems.)

 

Not many traders are into this but J.M. Hurst, etc. sees the markets as a summation of cycles. Note - This approach is seriously complicated (even compromised) by the individual cycles having variable ‘power’.. but if you watch the cycles of an instrument on about 12 different ‘timeframes’, sometimes you can see a quorum of currently and due to dominate cycles line up getting ready to ‘sum’ enough to move the odds of a strong move a little bit in your favor. hth

 

 

This last paragraph is one of the most compelling I have read anywhere ! Thanks for that Zdo

 

All the Best

John

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Hi zdo, take a look at the following thread that goes into some detail on my trading strategy. In short, my trading style is very similar to what's described in Markets in Profile, which I've learned mostly from Jim Dalton.

 

http://www.traderslaboratory.com/forums/f6/trading-market-profile-6605.html

 

 

Ant, Thanks for the link. From the depth of the post I could tell you had a method that goes with your ‘staying’ and I certainly wasn’t just singling you out. I think anytime any of us posts about an exit method (win or loss) , those we are trying to help would be better served if the type of system that accompanies it is also outlined in the same post. An entry or exit method in isolation, whether self generated or learned from another, can result is inconsistency, floundering, and consequent loss. A trader will not and should not ‘surrender’ to a system without knowing at an expectancy level that the exit method is an optimal match with the entry method …and that’s part of where ‘easier said than done’ as bf said comes from, too.

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bf, I am now projecting that you are looking for techniques and methods to 'stay no stay' much earlier in swings (is that correct?) but will share this anyway regarding the use of 'trend' lines I mentioned yesterday.

Used these 5 lines to stay long in the indexes (see attached 1/2 day timeframe) ---- up until a few days ago. ( … never mind that I am now a small percentage short and will add percentages via time no matter which way it goes (hopefully, all the way past 10,000 :) ) or that I would now currently use a close below the rightmost ‘live’ line to trigger working in another 20+% short)

 

Don’t know if anyone else mentioned this, but you can also use ‘fibonacci’ type retracement numbers to ‘stay/no stay’ too. Even though I wasn’t cognizant of it at the time, it is (ultimately no) coincidence that the 2nd / horizontal line was just below a .38 retracement when it was first drawn, just below a .50 retrace midway through its course in late July, and near a .61 retrace at its end when the 3rd / middle line came into rulership on 8/7.

DowStayLines.thumb.jpg.44b934b80bf1c1593b4d78f02a10fbab.jpg

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This last paragraph is one of the most compelling I have read anywhere !

 

 

JBWTrader or anyone else wants to follow up on this - good places to start are:

>For the theory, see The Profit Magic of Stock Transaction Timing by J.M Hurst

>For applications on smaller time frames, Glenn Suprenard has / had

CyclesWhatCycles

If you're willing to go through it all there are about 10-12 really solid trading advances scattered throughout his material and for my cycles work (which is a lot less straight forward than his / Hurst's) I still use a lot of his look'n'feel conventions, formatting, and 'indicators', etc.

 

btw For some this cycles stuff is easy ‘work’. For others, it is hard and tedious...

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BF

 

Trades that you think you have got a chance for a home run, trail them by the reaction points they build, either by the interval you used to enter or a higher interval.

 

Off-course you cant manage all trades like that, because not all trades form a trend. Therfeore I dont think the challange is the trade mangment, but being able to distinguish between trades that have a chance of being a home run and trades that should be treated as scalps. This is where what "ant" said becomes relevant and I couldnt agree more with him.

 

Unfortunatley there is no real easy, simple.... one size fits all answer, at least not that I know of.

 

 

Takecare

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Like I said, it's a mental game I play w/ myself regularly - the 'what if' game... What if I stayed in all day and just MOC'd. the trade. Then the next day - good thing I got out when I did!

 

Got a few ideas working here, but it's all rudimentary at this point. In the end, my gut says that to just keep doing what I am doing and be happy.

 

Thanks for the feedback everyone. While the exit holy grail probably doesn't exist, sometimes I need to get a thread like this going to reinforce what I've been doing is not half bad.

 

;)

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The very first thing a trader should realise is the fact that most moves in the market has fundamental reasons and TA is partially responsible for moves in the market,, you must understand and agree to this ,,

On the technical side,, No indicator has the predictive ability to tell you when the end is ,, How ever there are few tell tale signs such as

1) if trend starts then it takes 3 waves for trend to to end. ( for get about elliot at this stage )

2) if trend starts in lower time frame then look in higher time frame for price to get OB or OS example if 5 min chart is OB and is heading to OS then keep your eyes on 10 and 30 min to see how far they are from being OS

3) look for exhaustion ,,,, ( exhaustion theory ).. 2 consecutive exhaution is a good sign to mark the end of the trend

 

I am running an algo based code which uses above to call the end of the trend

 

Grey1

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Good questions and answers.

After trading and seeing many styles I think you nailed it when you said "While the exit holy grail probably doesn't exist, sometimes I need to get a thread like this going to reinforce what I've been doing is not half bad."

All I would add is that.....

what ever you do is if it works for you, be consistent.

match the exits and entry's with the system; ie; dont match short term entries with long term exits.

and lastly and from what i have seen and done over many years, is it never hurts to give yourself the opportunity to participate in the bigger moves. For me that means I will exit two thirds of my position and let the other third run, and run, and run....

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Meanwhile, Russia claimed fresh territorial gains in Ukraine’s Sumy region and ramped up attacks on surrounding areas—further darkening the outlook for markets.   Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Andria Pichidi HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • AMZN Amazon stock watch, good buying (+313%) toi hold onto the 173.32 support area at https://stockconsultant.com/?AMZN
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