Hello,
A while ago I posted a thread on this site about gaining and measuring the edge from a trading system's entry and got a lot of good response and helpful feedback.
So I thought I'd see if anyone wanted to discuss ways to gain an edge from a mechanical exit?
I have put one of these exits on my site/blog http://www.myforexdot.org.uk/SystemV.html the exit's edge is exiting at a favourable price, in this case exiting when the price closes at a new 3 day closing high when you are long and exiting at new 3 day closing low when you are short Vs. a time-based exit.
Other exits I have compared are -
1. Waiting for a trend reversal signal - works well in long trends but involves giving back a lot of profit as you wait for a signal that the market has finally turned and gone against you. Also produces more losing trades than winning ones.
2. A time-based exit. Usually produces slightly more winners than losers but doesn't make the most of long trends.
3. A lack of follow through. A compromise between exits 1 & 2. We might exit if we were long when the market failed to make a new high for 2 weeks etc... Doesn't need a full blow reversal to get out, just a sign that it's not quite going our way any more.
4. Taking a favourable price when you have it. I.e. the market makes a new high when you are long.
What are your exit strategies and which one produces the best results for you? And how have you measured these results?
A while ago I posted a thread on this site about gaining and measuring the edge from a trading system's entry and got a lot of good response and helpful feedback.
So I thought I'd see if anyone wanted to discuss ways to gain an edge from a mechanical exit?
I have put one of these exits on my site/blog http://www.myforexdot.org.uk/SystemV.html the exit's edge is exiting at a favourable price, in this case exiting when the price closes at a new 3 day closing high when you are long and exiting at new 3 day closing low when you are short Vs. a time-based exit.
Other exits I have compared are -
1. Waiting for a trend reversal signal - works well in long trends but involves giving back a lot of profit as you wait for a signal that the market has finally turned and gone against you. Also produces more losing trades than winning ones.
2. A time-based exit. Usually produces slightly more winners than losers but doesn't make the most of long trends.
3. A lack of follow through. A compromise between exits 1 & 2. We might exit if we were long when the market failed to make a new high for 2 weeks etc... Doesn't need a full blow reversal to get out, just a sign that it's not quite going our way any more.
4. Taking a favourable price when you have it. I.e. the market makes a new high when you are long.
What are your exit strategies and which one produces the best results for you? And how have you measured these results?