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Need help with exit strategies

  • #1
  • First Post: Jun 8, 2006 8:44am Jun 8, 2006 8:44am
I keep noticing that I'm doing much better entering a trade, but when I'm in one and it moves the direction I predicted, I consistently get out way too early. For example, I shorted USDJPY this morning at 145.18 and then got out at 144.84. I am now watching it down at 144.55.

I don't expect to be able to grab all of that, but a little more of that run down would have been really sweet. I guess I just got to thinking in my head "it can't go any lower" and I jumped out.

I'm reading a lot about strategies to enter a trade but not much about strategies to exit. Any suggestions? Good places to learn about exit strategies?

Squid
  • #2
  • Jun 8, 2006 9:32am Jun 8, 2006 9:32am
Quoting Squid
I keep noticing that I'm doing much better entering a trade, but when I'm in one and it moves the direction I predicted, I consistently get out way too early. For example, I shorted USDJPY this morning at 145.18 and then got out at 144.84. I am now watching it down at 144.55.

I don't expect to be able to grab all of that, but a little more of that run down would have been really sweet. I guess I just got to thinking in my head "it can't go any lower" and I jumped out.

I'm reading a lot about strategies to enter a trade but not much about strategies to exit. Any suggestions? Good places to learn about exit strategies?

Squid
I'm sure you will get a number of responses to this question and that they may all be different but I'll throw my tuppence in.

Personally, this relates to account size {$#,###.00} and designation {Full, Mini, Micro or Micro Mini}. By that I mean you should have the ability to have a minimum of 20 lots open that have moved against you without endangering the account.

The 20 lots will allow you to trade 4 different pairs if the opportunity presents itself. Hold yourself to a maximum of 5 lots per trade while keeping some powder dry for the next opportunity.
Open a position with a minimum of 2 lots. This gives you a few options as the trade matures. Scaling in, [that's another discussion guys] or Taking Profit while remaining in the trade.

So... EUR/JPY Short Trade
Short 2 Lots @ 145.18 and then get out of 1 at 144.84. {33 pips profit booked with 33 pips Open Profit still running. Now the Price has to climb to 145.51 for the Trade to become a losr. A SL on the remaining Open Position anywhere below that guarantees you a winner.}

I am now watching it down at 144.55.
Do not attempt to pick Tops or Bottoms. The number of times you are wrong will far outweigh the times you are correct. Allow the chart to tell you it's exhausted.

In other words it is very acceptable to see the maximum profit of your trade deminish before exiting your last position to close the trade.
  • #3
  • Jun 8, 2006 9:57am Jun 8, 2006 9:57am
Quoting Squid
I keep noticing that I'm doing much better entering a trade, but when I'm in one and it moves the direction I predicted, I consistently get out way too early. For example, I shorted USDJPY this morning at 145.18 and then got out at 144.84. I am now watching it down at 144.55.

I don't expect to be able to grab all of that, but a little more of that run down would have been really sweet. I guess I just got to thinking in my head "it can't go any lower" and I jumped out.

I'm reading a lot about strategies to enter a trade but not much about strategies to exit. Any suggestions? Good places to learn about exit strategies?

Squid
Funny thing, really...entering the trade is actually the easier part of the 2, in my opinion. Any decent system will provide excellent entries, but exits will absolutely make or break a system.

There is no good way to answer this question, unfortunately, because if it were something that was easy to answer, we'd all be millionaires...know what I mean?

I think your concern should be with following whatever rules your system provides. If that gets you out too early, then it's a system thing. I asked a similar question a few years ago and go the response of always going in with an even lot trade...when you hit whatever profit level you feel comfortable with, take 1/2 of the profit and move the other 1/2 stop to break even, while trailing the stop...this has worked reasonable well for some time, although I find that more than 50% of my trades end in only making profit on 1/2 the trade while the other 1/2 gets stopped out (meaning that trail doesn't add anything extra)...however, I've also found that in a good portion of them, the runs last for an extended period of time, thus offsetting the "break-even" trades quite nicely...the trick now is to determine what the best "trail" is...

However, from a psychological point of view, having a no risk trade (meaning your trade is break-even), is a lot easier to swallow...even if it has a less than 50% win ratio.
  • #4
  • Jun 8, 2006 10:48am Jun 8, 2006 10:48am
Same problem as you, I couldn't for the life of me make it with a technical exit but I think I have solved once and for all using money management only.

How I do it: When the price is in the profit at the same distance as the stop loss I close half the position while moving the breakeven for the other half. Now the second half will 1) either run with the trend and I'll slowly scale out or 2) hit the stop loss. In eiher situation you win. The downside is that very often the second half will hit the breakeven stop but the few that will ride will win nice pips for you. This management works well only when trading with the trend.
You can make variations on it, customizing it for you style.

-soso
-soso
  • #5
  • Jun 8, 2006 11:57am Jun 8, 2006 11:57am
Just my bit on break-even. When I move my stop to break-even after taking some profit, I like to jack up the stop to a couple of pips past break-even. That way, if the price takes out my stop, I still get a couple of pips instead of a tie (and we all know that a tie is like kissing your sister).

One more bit of Wizzdom from the Wizzard. He who tries to pick bottom gets stinky finger. Moral: don't be a pig and try to get the whole run. The middle third is fine. If you miss the bottom and top third, so what! Guess what, there is a whole new day tommorow. Get in after price turns, and get out before it turns again.
Nolite dormiens pungere ursum. -- Latan Proverb.
  • #6
  • Jun 8, 2006 12:06pm Jun 8, 2006 12:06pm
Quoting MrWhipple
Get in after price turns, and get out before it turns again.
Get in after price turns, and get out AFTER it turns again.

Still in the last 1/3rd though
  • #7
  • Jun 8, 2006 12:23pm Jun 8, 2006 12:23pm
Quoting Bemac
Get in after price turns, and get out AFTER it turns again.

Still in the last 1/3rd though
Sorry dat is wat i ment to say. If I am looking at a chart I do it right. Listen to him. I have only have had one Pepsi this morning.

However that being said, if I have a pip amount goal in mind rather than a support level or a rsi level or some other indicator for an exit, I will get out before the turn.
Nolite dormiens pungere ursum. -- Latan Proverb.
  • #8
  • Jun 9, 2006 12:38pm Jun 9, 2006 12:38pm
watch fibonnacci levels closely. This is where you would most probably see reversals.
  • #9
  • Jun 9, 2006 6:52pm Jun 9, 2006 6:52pm
Quoting Squid
I keep noticing that I'm doing much better entering a trade, but when I'm in one and it moves the direction I predicted, I consistently get out way too early. For example, I shorted USDJPY this morning at 145.18 and then got out at 144.84. I am now watching it down at 144.55.

I don't expect to be able to grab all of that, but a little more of that run down would have been really sweet. I guess I just got to thinking in my head "it can't go any lower" and I jumped out.

I'm reading a lot about strategies to enter a trade but not much about strategies to exit. Any suggestions? Good places to learn about exit strategies?

Squid
Hi Squid,

Have you tried van Tharp's "Trade Your Way To Financial Freedom"?
He has a couple of exit strategies there that you may want to look into.

Hope this helps.

East
  • #10
  • Jun 9, 2006 8:36pm Jun 9, 2006 8:36pm
instead of closing the trade just put a stop there or a few pips behind that way your still in the game but still get out where you thought was a good point at the time.... or continue to grab pips as they move your way, kinda like a manual trailing stop, in Oanda you have to do it that way... they don't support trailing stops....


Waaaa haa ha ha ha



Mike...
***Building an EMPIRE one pip at a time***
  • #11
  • Jun 9, 2006 9:17pm Jun 9, 2006 9:17pm
I use fib levels to determine my scale outs. I enter a trade, set a limit order for the next fib level of 75% of my lots. Once it hits, I move my stop to breakeven, and set a limit order for the next fib level at 15%.

If it hits that, I have 10% left over to ride until my system gives an exit signal or it hits b/e.
Mr. Trend
  • #12
  • Jun 12, 2006 9:56pm Jun 12, 2006 9:56pm
Set a target before you enter. If/when it gets hit, exit. If it keeps going, who cares? Forget about getting every pip, just be happy you didn't lose anything...
  • #13
  • Jun 12, 2006 10:18pm Jun 12, 2006 10:18pm
Quoting Mr Trend
I use fib levels to determine my scale outs. I enter a trade, set a limit order for the next fib level of 75% of my lots. Once it hits, I move my stop to breakeven, and set a limit order for the next fib level at 15%.

If it hits that, I have 10% left over to ride until my system gives an exit signal or it hits b/e.
Mr. T,
This sounds like a good idea. 75% instead of only 50 %. Something for me to consider.
JOHN 3:16
  • #14
  • Last Post: Jul 9, 2007 8:16am Jul 9, 2007 8:16am
  •  dado26
  • | Joined Mar 2007 | Status: Plan your trade and trade your plan | 180 Posts
Merlin, Dialist.... I ve got a question for you that really bothers me....

I enter a trade acording my entry rules and trying to aplly risk-reward (1:2) ratio when exiting my trade. But when exiting I use partial exits and acording my rule I take 70-80% of my position when I reach 20pips then i leave the rest of it to ride possible biger move( I exit that one on rollover of my EMA...) My average stop is from 15-25pips...My system is from 55-70% acurate...

My problem is...how to aplly this 2:1 risk-reward rule in my system...do I have to go for biger reward or tighten my stop-loss(thats not o.k.-it is quite tight...)

I hope that you understand what I was trying to ask you...
Thanks in advance.....

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