How To Exit a Profitable Trade

[roztom 10]

Ill try to explain without going into much detail. I have criteria I look at for trade set-ups. Basically, each 15 minute candle is a potential trade. I read the price action, vol and market levels (and a few other things) to determine if there is a potential for lets say, at least 6 ticks of action. My decision to take the trade comes in at about 7 minutes into the candle. My stop and target orders are set for 6 ticks. Once it is determined that the market has shown me that my target can be made, or the levels are in reach, I enter the trade on limit orders (momentum) based on my trading rules for the set-up. If I am wrong, I get stopped out, If I am right, I hit my target lock it in. If the market continues on, I manage the target and trail a stop to get the most out of the trade. The stronger set-ups, the more contracts I am comfortable entering with. I may scale out or go all out when managing the trade. I don't add to the trade and I never move a stop to increase risk. I prefer to trade during the first and last 1:30 minutes of the cash session.

 

Steve: By any chance do you break your Profiles into 15m chunks? Tx

[Steve66 10]

Steve: By any chance do you break your Profiles into 15m chunks? Tx

 

Hi roztom, What do you mean by profile?

[steve46 12]

Just out of curiosity Steve66, how is your system working in the current market and do you see any change in performance recently from say, a year ago....? Not concerned with details but with your general impressions.

 

For example, about a year ago I ran into some problems with my DAX data....had to make some adjustments......surprisingly I found something that significantly improved my system even though I am trading only the open and close....

 

By the way I work "inside" 10 minute bars...

 

Thanks

Edited March 12, 2012 by steve46

[roztom 10]

Hi roztom.

 

Steve: You mentioned Mkt Profile, which I use also. I should have been more clear.

 

Do you/have you broken the profile down into 15m mini profiles since you are using 15m bars?

 

BTW, 15m bars are very important to me... On a rotational day I target where the stops should be clustered on the other side of the range...

 

This morning short targeting Fridays low and Thuirsdays close.. I have a Micro LVN @ 60.25. For my long I exited 64.75 and I had a seconday target which I did not position for of 67.00 which would have been unable. These are all generated by auction theory and the Profile...

 

Tx for the info on how you manage your trade...

[Steve66 10]

Just out of curiosity Steve66, how is your system working in the current market and do you see any change in performance recently from say, a year ago....? Not concerned with details but with your general impressions.

 

For example, about a year ago I ran into some problems with my DAX data....had to make some adjustments......surprisingly I found something that significantly improved my system even though I am trading only the open and close....

 

By the way I work "inside" 10 minute bars...

 

Thanks

 

I designed my strategies for a fast moving market. Last year was very good. I have taken vacation the last 2 weeks of 2011 and first month of 2012 from trading . I have found that 2012 ES has slowed down a bit. I am having to wait longer for set-ups to form. I have adjusted by adding more contracts. It looks like since the new contract (ESM2), we are seeing a bit more overall trading vol. I am hoping for a bit more volatility. Only time will tell.

[Steve66 10]

Hi roztom.

 

Steve: You mentioned Mkt Profile, which I use also. I should have been more clear.

 

Do you/have you broken the profile down into 15m mini profiles since you are using 15m bars?

 

BTW, 15m bars are very important to me... On a rotational day I target where the stops should be clustered on the other side of the range...

 

This morning short targeting Fridays low and Thuirsdays close.. I have a Micro LVN @ 60.25. For my long I exited 64.75 and I had a seconday target which I did not position for of 67.00 which would have been unable. These are all generated by auction theory and the Profile...

 

Tx for the info on how you manage your trade...

 

I use a 20 day (trading month) 30 minute profile chart. I track value area low / high/POC and VPOC data. I use them in my trading range strategies with fibonacci.

[joshdance 10]

Type of day, and relative volume give me an idea of what I can reasonably expect from the market. Yesterday, for example, it was clear to me that there was a high probability we would stay within the prior day's range, and even higher confirmation around lunchtime of this. I had a long on, and was content with closing it, feeling very sure that it would not be a breakout and run type of day. We never know these things, but these are my main two metrics. I am sure you are familiar with at least the day type, Tom, from your style of trading.

[Christian359 10]

You are asking a question that has no right answer to it.

 

First off, you should only be taking opportunities that have a great potential to make more than you are risking.

 

Secondly, you have to learn how to "draw lines in the sand", where you get out if it not longer does A or if it begins to do B and once the line in the sand is crossed you bail and be happy with what you took or what you lost.

 

Doing the above requires a great understanding of the components of your system. When you understand how the parts of your system move together, you can confidently draw lines in the sand.

 

Completely right. I think that if you are in a position you have carefully look after it. So profit never wrong and it depends of your own system of trading.

[roztom 10]

Completely right. I think that if you are in a position you have carefully look after it. So profit never wrong and it depends of your own system of trading.

 

Certainly correct..

 

The reason I started this thread was to see if there was anything beyond what most of us already know..so far nothing new... But I am hopeful that I may get some ideas either from the market structure side, volume side or math side.. You never know...

 

Appreciate your post..

[TheDude 10]

Thanks for visiting this thread and sharing your strategies. While many work on the entry to a trade if we can't exit efficently and manage the trade sucessfully to a profitable conclusion we will not be long for this business.

 

Please share what you have found, through your testing has yielded the moost consistent results. Also if your strategy is specific to your timeframe. Swing Trader might be different from short term daytrader or Currency vs. ES.

 

While timeframe, etc is important to a trade I am hoping you will share your exit strategies and based on testing what seems to be the most consistent process:

 

Some ideas:

 

Reversal signal in your timeframe

Trailing Stop

Time Based Stop

Target

Volatility Stop (ATR)

Trail Behind Moving Average

Market based target: Previous High/Low, CLose,Swing High/Low, Gap Fill Fill/Supp/Resistance/Other

Standard Deviation/Volatility Band

Other

 

If you use other processes please share.

 

Thanks for visiting this thread and sharing your insights.

 

given the time frame you are trading, you need to first determine how you define a trend. this should be based on structure, not an indicator which is only an abstraction of your creation.

 

you then exit the trade when you notice the market is trending counter to your trade. in the long run, this method will ALWAYS out perform trailing stops.

 

i dont believe trailing stops to lock in profit are the way to go if profit maximisation is the goal. if psychological well being is the goal, then use trailing stops.

 

theres nothing wrong with aiming for psychological comfort over profit maximisation. after all, scared money is lost money.

 

which would you rather have out of 100 trades - 30 that make 50 ticks each, or 2 that make 1500 each? issues arise in testing when those 2 trades are considered outliers, black swans, luck, or other labels and disregarded as they are way out side the realm of normal behaviour.

[stpips89 10]

Thanks for visiting this thread and sharing your strategies. While many work on the entry to a trade if we can't exit efficently and manage the trade sucessfully to a profitable conclusion we will not be long for this business.

 

Please share what you have found, through your testing has yielded the moost consistent results. Also if your strategy is specific to your timeframe. Swing Trader might be different from short term daytrader or Currency vs. ES.

 

While timeframe, etc is important to a trade I am hoping you will share your exit strategies and based on testing what seems to be the most consistent process:

 

Some ideas:

 

Reversal signal in your timeframe

Trailing Stop

Time Based Stop

Target

Volatility Stop (ATR)

Trail Behind Moving Average

Market based target: Previous High/Low, CLose,Swing High/Low, Gap Fill Fill/Supp/Resistance/Other

Standard Deviation/Volatility Band

Other

 

If you use other processes please share.

 

Thanks for visiting this thread and sharing your insights.

 

I agree that exiting a trade is perhaps the most difficult part of trading. I personally believe that different market conditions call for different approaches to our exit strategy. Here's a good article about exiting Forex trades that gives some different approaches to exiting in trending vs. consolidating markets, as well as when to let trades run. I personally believe there is no concrete way to exit and that each trade's exit is individual from the last. I think a trader needs to stop and take a look at market conditions before entering the trade, as well as the market structure, and base their exit on this information, rather than a mechanical approach.

[Ianprotrader 10]

My trade management is very simple. I set targets for the trades before I open a position and I realize partial sizes in each target. I also move the stop loss order along the trade, each time the currency makes new low (or new high if it is a short-position).

[roztom 10]

I appreciate all the comments and sharing...

 

I basically go all in but scale at logical targets/obstacles - what I consider high probability areas and then manage runners differently...

 

1. Obstacles/Targets

2. Runner/Target

 

Obstacles might be previous close, todays open, yesterdays low, etc - all based on current trend and to me I always want to think where stops are on the other side as attractors and also obstacles where the other side might come in...

 

The runner is just that - it is also targeted and depends where we are relative to an attractor - a dividing line or Longer timeframe support/resistance...

 

The runner, however, can be a source of frustration as nice chunks can be given back..that is really where there seems to be no magic answer... If you trail 2 swings back the give back is huge..maybe that is the conumdrum.. or you use something close like a ATRS or something and the odds of being stopped are high...

 

SO I conclude that for a runner, the statistics need to prove that overtime giving up open profits to have the opportunity for the long ball makes sense..

 

Have any of you come to that conclusion?

 

Thanks for your participation.

[steve46 12]

Tom

 

I think you may be making this a bit more complex than it needs to be

 

Markets exist in a framework of events....those events impact markets and the result is "cyclical behavior"...

 

To the extent that you are able to anticipate the result of this cyclical behavior you should maintain a presence in the market continously.....most folks do not have the skills to anticipate the swings and so they look to smooth out the cyclical behavior by investing long term...

 

Some think that trading swings (medium to long term) gives them the ability to realize a profit so they use that approach and some few of us, believe we can anticipate that cyclical behavior on a short term basis..

 

No matter which framework you choose, the operable concept remains that you can't profit unless you are in the market......for me, I am very good at seeing opportunity and getting on board (entering favorably) however I cannot predict how long a trending move will last..

 

My solution is to leave a small piece of my position in the market for as long as I believe a trend is in place...Now the next question is "how do you determine whether a trend is being sustained"?

 

There are several easy methods for determining whether a trend is likely to continue.

 

One, is to use a moving average....for the ES contract I like to use a 20 period EMA...as price moves you simply monitor the distance from price to the moving average....if price stays away from the moving average...it means that the trend is sustained....if price tests or crosses, this signals a possible end to a trending move....Bollinger Bands also work very well for this purpose.

 

Two, price oscillates from balance to imbalance....balance is seen as horizontal development (sideways movement) while imbalance is seen as sustained directional movement with very little overlap of bars (vertica movement)....

 

Three....The S&P market displays seasonal fluctuations in volatility....these fluctuations are what professionals call "length of line"...meaning that once a trend starts...there is a good chance that it will continue for a specific number of points...3, 5, 7, 10...some of this is expressed using the charting tool "average true range".

 

As an exampe, yesterday, I got long at 1382....I took profit at 3 points and then left the rest to run, "knowing" that the odds favor a sustained trending move throughout the morning...after lunch, I noticed that programs were still marking this market up.....at my discretion I simply left that balance in place until the close....for this market, at this time of year, my goal is 10 points.....if I get more great...if I was wrong...well thats always part of the game isn't it...? One thing that is clear....in order to have a longer potential length of line, you want to establish a position early and stay with it...

Edited March 24, 2012 by steve46

[SIUYA 11]

The runner, however, can be a source of frustration as nice chunks can be given back..that is really where there seems to be no magic answer... If you trail 2 swings back the give back is huge..maybe that is the conumdrum.. or you use something close like a ATRS or something and the odds of being stopped are high...

 

SO I conclude that for a runner, the statistics need to prove that overtime giving up open profits to have the opportunity for the long ball makes sense..

 

 

Yes there is frustration....always will be....let it run there are give backs, take profits too early you miss the run.

 

I try and get on runners and just let them go.....my entries and exits are more discretionary and hence not really able to be tested (something I am attempting to automate more) however there is another advantage to letting things run that probably could be tested to a degree --- discretionary exits are an issue......this advantage is that once on a runner as it goes your way you really dont need to do too much else except check the larger picture. You are not trying to capture 20 days x30 pips a day (as an example), instead you try and get on board....and once on board, you will hope to get that 600 pip equivalent with one trade + maybe a bunch of small losses ,or small wins. (eg; experimenting with the ideas of close initial stop, that trails to a level quickly and then stops trailing, letting it have breathing room for the runner)

The other advantage of this is then that you can look for the bigger moves in more instruments.

Of course this requires enough margin cash to run multiple instruments, so it maybe not so applicable to day trading

 

so even if you make the same amount of money letting positions run as always taking profits there are other advantages

[stpips89 10]

Yes there is frustration....always will be....let it run there are give backs, take profits too early you miss the run.

 

I try and get on runners and just let them go.....my entries and exits are more discretionary and hence not really able to be tested (something I am attempting to automate more) however there is another advantage to letting things run that probably could be tested to a degree --- discretionary exits are an issue......this advantage is that once on a runner as it goes your way you really dont need to do too much else except check the larger picture. You are not trying to capture 20 days x30 pips a day (as an example), instead you try and get on board....and once on board, you will hope to get that 600 pip equivalent with one trade + maybe a bunch of small losses ,or small wins. (eg; experimenting with the ideas of close initial stop, that trails to a level quickly and then stops trailing, letting it have breathing room for the runner)

The other advantage of this is then that you can look for the bigger moves in more instruments.

Of course this requires enough margin cash to run multiple instruments, so it maybe not so applicable to day trading

 

so even if you make the same amount of money letting positions run as always taking profits there are other advantages

 

I agree that letting trades run has its advantages, mainly that it reduces over-trading and stress. But, I would also say that if you have a relative small trading account it can be difficult to sit on your hands for weeks or months while a trade unfolds. I think the better way to let trades run is to try add to your trades at strategies points as the market moves in your favor (averaging in), whilst never exposing yourself to more than 1 times your normal risk. OR I like the idea of the 1:2 or 1:3 risk reward.

 

Consider with a fixed 1:2 risk reward, you can lose 66.6% of your trades and still about breakeven. So, you only need to win a little over 33.3% of the time to make money with a fixed 1:2 risk reward. But, this means you're going to have some big winners that you cut a bit short, however it also means you will hit more winners that would have turned into losers or stopped you out at breakeven had you held and not taken the 1:2 r:r profit...a tricky game indeed.

[SIUYA 11]

I have been working on various ideas about buildding a position and letting it run automatically

yes you need enough money to build a position, and the example I have used in the chart is a day whereby it runs.....

I have gone down to a level in a range bar chart in order to put a lot of trades on, to test the system and see if the theory works....

It is rather simple - look to build positions (Se) on various simple moves. Then count reactions with the prevailing trend (s) and against the trend (x, and Sx) to notify of ends to the moves.

I have not worked out exact exiting levels yet, and so far you have to determine if a day is likely to be a runner, but it is looking promising.Small losses for getting it wrong, good gains for letting it build a position. The other thing is to determine the qty to be entered each time - ie; fixed amounts, varying qtys for entry and exit....maybe I should just keep it simple.

 

Point is when it runs you have to let it go. Otherwise, too often the itchy trigger finger telling you to try and pick bottoms can cause problems.....I am sure this happened around 10.00 am yesterday for some, and when it comes to exiting, its more along the lines of the exit triggers or potential exit triggers either building up, or taking you out slowly.....

remember this is overkill regards the number of trades and is not going to be the main driver - these are more counters to try and keep things in check. An idea I am working on.

 

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