"Exits are where the money is." | Forex Factory

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"Exits are where the money is."

  • #1
  • First Post: Edited 11:48pm Feb 2, 2007 10:33pm | Edited 11:48pm
"Exits are where the money is." by Paul M King, Futures magazine. Great article. I have always wondered. The most common thing in every thread is the importance of getting out of the trade. If the exit is the most important, why is it the least talked about? It seems like we spend most of the time trying to find the perfect entry or "HOLY GRAIL" instead of the perfect exit. Maybe I am wrong but from what i understand the entry is not as important as the exit. I know exits have many variables to be specific but I think more time should be devoted to this topic.
What I have been testing for my exit is..... ex. I buy 2 lots at 1.3000 with stop of 20 pips. If price moves in my direction 20 pips sell 1 lot and for second lot i move stop to +1 if price continues to 40 pips i move stop to 40 pips if price reverses i exit with 21 pips. i never set a profit target i just move stop so i can try letting profits run. Still in testing phase though. My exit strategy is generic, but am sure that it can be applied to different entries. There are things we dont know (entry) but there are things we do know (ex. cable seems to swing around 20-30 pip range) to help build a perfect (at least better) exit. I have seen some people using an ATR for exits.
Even though our entries might be different if we post are exits some of us could improve our exits by incorporating what other people use or maybe some exits that work for some might also work for others.

Just my 2 pips. A pip for yours.
Thanks to everyone newbie to professional for the things i have learned and continue to learn here at FF.
Noe



"An investment in knowledge always pays the best interest." Benjamin Franklin
  • #2
  • Feb 2, 2007 10:51pm Feb 2, 2007 10:51pm
Your getting warm...with all the mental energy that gets applied to trading on this forum it's suprising how little gets written about managing and closing trades.
The breaking of a wave cannot explain the whole sea.
  • #3
  • Feb 2, 2007 11:03pm Feb 2, 2007 11:03pm
I know in begginner Q&A Dialist has a great thread on MM. But know has really discussed the exit strategy.



Noe
  • #4
  • Feb 2, 2007 11:08pm Feb 2, 2007 11:08pm
Quoting vcam6
"Exits are where the money is." by Paul M King, Futures magazine. Great article. I have always wondered. The most common thing in every thread is the importance of getting out of the trade. If the exit is the most important, why is it the least talked about? It seems like we spend most of the time trying to find the perfect entry or "HOLY GRAIL" instead of the perfect exit. Maybe I am wrong but from what i understand the entry is not as important as the exit. I know exits have many variables to be specific but I think more time should be devoted to this topic.
What I have been testing for my exit is..... ex. I buy 2 lots at 1.3000 with stop of 20 pips. If price moves in my direction 20 pips sell 1 lot and for second lot i move stop to +1 if price continues to 40 pips i move stop to 40 pips if price reverses i exit with 21 pips. i never set a profit target i just move stop so i can try letting profits run. Still in testing phase though. My exit strategy is generic, but am sure that it can be applied to different entries. There are things we dont know (entry) but there are things we do know (ex. cable seems to swing around 20-30 pip range) to help build a perfect (at least better) exit. I have seen some people using an ATR for exits.

Just my 2 pips. A pip for yours.
Thanks to everyone newbie to professional for the things i have learned and continue to learn here at FF.
Noe
It is always more fun as a young person that has not learned all about driving a car to want to get on the highway and start driving, without realizing there are rules that must be followed to ensure you are going the right direction.
And once you are sure you are going the right direction, you must know when your exit comes up, you recognize it and don't go past it and run out of gas or get into a wreck because the road is a dead end up ahead. .
To a young person that is just details, details. They believe they will figure it out as they are going along, without realizing that once you are on the highway, you cannot get out the map to see where your exit is...you must have an exit strategy before you get on the highway.
Stan
  • #5
  • Feb 2, 2007 11:10pm Feb 2, 2007 11:10pm
Another option would be to take partial profits. Lets say you've got 100,000 units in a trade and you're up 50 pips. You could do a market order for 20,000 units in the opposite direction and you'll shrink your position to 80,000; locking in some profits. If it goes another 50 pips the next day maybe you take another 30,000 units off the table and move your stop to breakeven.
How you act is more important than how you feel.
  • #6
  • Feb 2, 2007 11:19pm Feb 2, 2007 11:19pm
Quote
Another option would be to take partial profits. Lets say you've got 100,000 units in a trade and you're up 50 pips. You could do a market order for 20,000 units in the opposite direction and you'll shrink your position to 80,000; locking in some profits. If it goes another 50 pips the next day maybe you take another 30,000 units off the table and move your stop to breakeven.


I am going to try test that with my current exit. Maybe just adjusting my stop.

What I have found hard is trying to acheive a 3:1 P/L. If I have a 30 pip stop on eur, I know a 90 pip PT is not common for a daytrade.


Noe
  • #7
  • Feb 2, 2007 11:45pm Feb 2, 2007 11:45pm
80% of Trading = Money Management / Position Size
15% of Trading = Exits Exits and Exits
5% LUCK

That's the bottom line, 'cause Twoblink said so...

google:
  • #8
  • Feb 2, 2007 11:52pm Feb 2, 2007 11:52pm
Quote
80% of Trading = Money Management / Position Size
15% of Trading = Exits Exits and Exits
5% LUCK

That's the bottom line, 'cause Twoblink said so...


I'll agree with that. At this point I'll agree with anything that helps me improve.

Even though our entries might be different if we post are exits some of us could improve our exits by incorporating what other people use or maybe some exits that work for some might also work for others. I am assuming that everyone reading this thread has a basic knowledge of forex and this is just one aspect of a total strategy that helps someone move forward.

Noe
  • #9
  • Feb 3, 2007 2:48am Feb 3, 2007 2:48am
Quoting Craig
Your getting warm...with all the mental energy that gets applied to trading on this forum it's suprising how little gets written about managing and closing trades.
I had similar concerns on maximising my trading profits and started this thread .
The replies have changed my attitude to scaling out.
  • #10
  • Feb 3, 2007 9:10am Feb 3, 2007 9:10am
As an intraday trend trader, my standard exit policy is as follows:

1) Half position out at the previous swing high/low of the current trend and move stop to break/even.

2) Let the second half run until:
- Price action signals a reversal (pin bar formations, evening stars, etc)
- We hit a level of confluence of previous support/resistance in the longer term time frame (weekly and monthly pivots, round numbers, 4H chart previous high/low, etc)
- If the correlated pairs are showing weakness. For example, if I am long GBPJPY, I also monitor GBPUSD and USDJPY. Well, if I see that GBPUSD is violently bouncing down off a confluence of support/resistance, we will probably also see also a retrace on GBPJPY against my interests so I will close my long position out locking profits in.

Also, as a side note, I not always let my stop loss get hit. If I enter a trade and I see that the trade is just not taking off in my direction, or that we start violating the levels I based my entry off, etc, I might prematurely close my position at a smaller loss waiting for a better moment to re-enter. Sometimes, escaping out of a losing trade with a relatively small loss is a victory in itself.
  • #11
  • Feb 3, 2007 3:47pm Feb 3, 2007 3:47pm
Quote
I had similar concerns on maximising my trading profits and started this thread .
The replies have changed my attitude to scaling out.
PeterFM thanks for the link. Out of all the ways I have tried using to exit, scaling out seems the most promising so far.


Quote
As an intraday trend trader, my standard exit policy is as follows:

1) Half position out at the previous swing high/low of the current trend and move stop to break/even.

2) Let the second half run until:
- Price action signals a reversal (pin bar formations, evening stars, etc)
- We hit a level of confluence of previous support/resistance in the longer term time frame (weekly and monthly pivots, round numbers, 4H chart previous high/low, etc)
- If the correlated pairs are showing weakness. For example, if I am long GBPJPY, I also monitor GBPUSD and USDJPY. Well, if I see that GBPUSD is violently bouncing down off a confluence of support/resistance, we will probably also see also a retrace on GBPJPY against my interests so I will close my long position out locking profits in.

Also, as a side note, I not always let my stop loss get hit. If I enter a trade and I see that the trade is just not taking off in my direction, or that we start violating the levels I based my entry off, etc, I might prematurely close my position at a smaller loss waiting for a better moment to re-enter. Sometimes, escaping out of a losing trade with a relatively small loss is a victory in itself.

Thanks WTB. right now for me I am trying to be purely mechanical. I know in the long run I would like to have a system that is more discretionary like yours. But what I need to learn is price action. The only problem is cant get a straight definition of PRICE ACTION. You just have to know it when you see it. Through time though I hopefully will learn.

I would like to encourage everyone to participate. From reading some threads there seems to be this hesitance of divulging there entry because if everyone entered at the same time the system wouldnt eventually work or some people have put alot of blood, sweat and tears just to give it to someone who hasnt paid there dues. Either way, the great thing about discussing exit strategies is that since we all enter at a different price nothing is given away because we will never exit at the same time.

Thanks for reading,
  • #12
  • Feb 3, 2007 4:04pm Feb 3, 2007 4:04pm
Quoting vcam6
PeterFM thanks for the link. Out of all the ways I have tried using to exit, scaling out seems the most promising so far.
Actually I no longer scale out, it's all or nothing for me now. What I am thinking of trying, and started last week on a trial, is to scale in to the trend. As my method is designed to take advantage of the fullest trading rnage in a trend it is obviously most at risk at the 'turning point'. As I play the daily charts I need stops sometimes in excess of 100 pips so having my full 5 lots on can be costly. Although the strike rate is over 60% now, it's not certain, as time goes on that I can maintain that. So I'm going to reduce the risk on the initial trade but pyramid IN as a trend develops.
Quote
Thanks WTB. right now for me I am trying to be purely mechanical. I know in the long run I would like to have a system that is more discretionary like yours. But what I need to learn is price action. The only problem is cant get a straight definition of PRICE ACTION. You just have to know it when you see it. Through time though I hopefully will learn.
In case you haven't found this yet, you might find this useful, and Jim will answer any questions that may not be covered by the other regulars in the thread http://www.forexfactory.com/showthread.php?t=2331
Quote
I would like to encourage everyone to participate. From reading some threads there seems to be this hesitance of divulging there entry because if everyone entered at the same time the system wouldnt eventually work or some people have put alot of blood, sweat and tears just to give it to someone who hasnt paid there dues. Either way, the great thing about discussing exit strategies is that since we all enter at a different price nothing is given away because we will never exit at the same time.

Thanks for reading,
I doubt if anyone followed my calls the banking world would feel a tremor
  • #13
  • Feb 3, 2007 4:20pm Feb 3, 2007 4:20pm
Quote
In case you haven't found this yet, you might find this useful, and Jim will answer any questions that may not be covered by the other regulars in the thread http://www.forexfactory.com/showthread.php?t=2331

I have just started reading the thread about a few weeks ago. I wanted join but I read that they were going to update their website with videos, so I am just waiting.

Quote
I doubt if anyone followed my calls the banking world would feel a tremor

We can try.
  • #14
  • Feb 3, 2007 4:40pm Feb 3, 2007 4:40pm
Quoting vcam6
I have just started reading the thread about a few weeks ago. I wanted join but I read that they were going to update their website with videos, so I am just waiting.
We can try.
That link is the one on the public side and will always be there. Jim still answers questions posted in there, plus the other traders give support when Jim's not around.
If you felt like joining James16 group, but were holding back, it's worth noting that there is plenty of stuff to keep you busy until Jim gets the video training going. If you wanted to Jim is happy for you to sign up for a month, have a look around, and then if you decide to wait for the upgraded stuff then he wouldn't be offended if you dropped out for a while. At least you'd have a chance to see what's on offer, and, more importantly, you'd have a better idea of what sort of stuff Jim will be concentrating on.
Anyway, there's plenty to keep you busy in the free area thread. I printed a load of it off when I first found the thread and keep going back to try and fix it in my ageing brain. Same with the posts in the Private Forum.
There is also an extremely good set of threads by Fijitrader on advanced Money Management and trading psychology. Dial also has several active threads dealing with the systems he uses.
  • #15
  • Feb 3, 2007 5:00pm Feb 3, 2007 5:00pm
Quoting WTB
2) Let the second half run until:
- Price action signals a reversal (pin bar formations, evening stars, etc)
- We hit a level of confluence of previous support/resistance in the longer term time frame (weekly and monthly pivots, round numbers, 4H chart previous high/low, etc)
- If the correlated pairs are showing weakness. For example, if I am long GBPJPY, I also monitor GBPUSD and USDJPY. Well, if I see that GBPUSD is violently bouncing down off a confluence of support/resistance, we will probably also see also a retrace on GBPJPY against my interests so I will close my long position out locking profits in.
I forgot to add another element I factor in when it comes to close out the second half of my trade:

- Average daily range for the specific pair I am trading. If I am trading for example GBPUSD, which has an average move of 130 pips per day, as soon as we approach that figure for the current day I follow closely the price action on the 5 and 15 minutes charts to close out as soon as I see the first symptoms of a weakening. That doesnt mean at all that I look to capture the entire daily range per trade (I wish I could). Conversely, if GBPUSD has already run 80+ pips that day I will probably not enter a trade even if my system signals the entry.
  • #16
  • Feb 3, 2007 7:50pm Feb 3, 2007 7:50pm
Quoting WTB
I forgot to add another element I factor in when it comes to close out the second half of my trade:

- Average daily range for the specific pair I am trading. If I am trading for example GBPUSD, which has an average move of 130 pips per day, as soon as we approach that figure for the current day I follow closely the price action on the 5 and 15 minutes charts to close out as soon as I see the first symptoms of a weakening. That doesnt mean at all that I look to capture the entire daily range per trade (I wish I could). Conversely, if GBPUSD has already run 80+ pips that day I will probably not enter a trade even if my system signals the entry.


Hi WTB,

This is exactly what I have been implementing in my testing of short term trading. My main problem is when does the day start? I live in GMT+10 zone, so my day starts when I wake up!! But when does the fx day start, is it when london opens, or when us opens?

Cheers,
K.
  • #17
  • Last Post: Feb 4, 2007 9:49am Feb 4, 2007 9:49am
I use 00:00 GMT, which moreless coincides with Tokyo open. For my trading style, it works best when Tokyo has been range bound and slow moving, because we usually see some juicy moves as London's volume kicks in, signaling the overall intraday trend for the rest of the day. I am apprehensive to trade when we see large overnight (Tokyo market) moves because, given the 130 pip average move on pound, I dont feel comfortable to enter when price has already moved half that much overnight before I am even in the position to search for an entry!

PS: I only trade London session by the way.
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