Exit strategies

It seems a lot of energy is spent on identifying crisp, mechanical triggers for [I]entering [/I]a trade but that defining and optimising an equally clear [I]exit [/I]strategy is much more cloudy. I would be really interested to hear what kinds of exit strategies you use that you feel optimise your trade results consistently over time, with or without constant monitoring of a position.

Lagging indicators, such as MA crosses, or trailing stops tend to whipsaw and, in any case, can give back a lot of pips before triggering even on a profitable trade.

Anticipatory projection targets such as fibonnacci, pivots, S/R levels need to be constantly monitored to avoid being missed by a few pips and the market then reversing - or the market flies straight through them and you miss a big move.

Fixing both TL and SL when the trade is placed is good risk management and can then be left unmonitored to find its own fate - but again prevents any chance of riding the occasional big move.

Multiple exits are another possibility combining a fixed TL with, say, a fib extension and a trailing stop.

It does sometimes seem that looking, for example, for a (boring) 10-15 pips on each trade on a 5M tends to give the same return over a period of time than using projections like fibs giving 2-70 pips per trade.

How do you plan [I]your [/I]trade exits?

Best thing I can say is to trade what is there and not to trade what you want to see. For example many new traders have this approach to want 50 pips or 100 pips or whatever pips in order to get the 1:2 risk reward ratio according to the stop loss which they have placed so they hope the market will give them that and therefore end up trading what they want and not what is there in front of them.

It is really important for a trader to know how much movements the markets will make as then only they would be able to decide about closing their trades. Also this means that they will be able to get more Profits with their own trading experience :slight_smile:

Yes I agree that one shouldn’t just place your target where you would like it reach, but what do you mean By “trade what is there” . What is “there in front of them”? That kind of analysis is exactly what I would like to hear about - how do [U][I]you [/I][/U]plan your exit strategies?

I have the same feeling here, too - how can a trader [I][U]know [/U][/I]how much movement the markets will make?

New trades look very similar in the beginning. After that some fizzle out whilst others make some follow-through - and a few even move on to become really significant trends.

I am just interested what different kinds of approach and techniques traders employ to optimise their exit levels. What, for example, do you do, Archie?

Exits should let profits run and cut losses short. Those that do often give back many pips from the open trade equity high but that is not important. The only thing that matters is the distance between your entry and your exit. When you try to get more by exiting early, you will cut profits short in the long run.

-Adrian

Totally agree with this! A lot of emphasis is placed on trade entries but not much on exits, such as SL and TP. I myself pay close attention to the average true range of the pair when it comes to having a benchmark for my SL and TP, but I also look at the nearby inflection points. Another interesting component of exit strategies is that of closing early or scaling out, which is something I am trying to work on myself.


Well, my exit strategy is trendline. You can see the attachment right now, i already bought the EC when the price brokeout LTL, and my exit is UTL. well my trading is on h1 TF,so i have to check it out in 1 hour if the price breakout UTL. if the price breakouts the UTL, i’ll cut my loss.

One important to note, i dont execute a trade if i cant find an exit although i have a signal for entry. Second to note, i also do not trade if the risk is too high. my calculated risk is about 30-40pips if the price breakout.

correction: What i means with bought is i sold the EC becaouse the price breakout LTL. Thanks

You’ve done the right thing, in the case out of the market. Indeed, traders should have clear boundaries. It is adapted to the pair and also the timing of the election. Hope that will be obtained, ie profit, will be able to overflow from time to time. Of course, you should be optimistic.

[QUOTE=“PipDiddy;722922”]Totally agree with this! A lot of emphasis is placed on trade entries but not much on exits, such as SL and TP. I myself pay close attention to the average true range of the pair when it comes to having a benchmark for my SL and TP, but I also look at the nearby inflection points. Another interesting component of exit strategies is that of closing early or scaling out, which is something I am trying to work on myself.[/QUOTE]

PipDiddy has made a good point here which I’m surprised has only been mentioned once (although I think that TheLastBear was eluding to it). The ATR indicator is good for planning exits too.

If you are day trading & are out of all positions by NY close (or even London close), then you don’t want your TP to be too far away. If the ATR is 80-pips & the pair has already made its low at London Open then regardless of where you get in to a trade, you should have a your TP within that 80-pips of the low (taking other S/R in to consideration too).

I’m on my phone at work with a poor signal so it would take ages to find a link but a quick Google search of “ATR exit strategy” should, in theory, throw up a couple of articles for you to read.

Well I trade only daily and weekly charts really. So i’m usually going for no less than at least a 150 pip take profit. So with my exits I usually have a 2:1 or higher risk reward ration, So once i’m about 75 pips in profit i move my SL to BE then once I’m up 125-150 ( if that wasn’t my TP ) I move up to about 50 pips SL to lock it in, than let the trade run to my TP. Or if its a larger move of say 300 pips i’ll lock in around 175, I want to give breathing room for trades because, retracements happen very frequently.

I believe that spending most of your energy should be on identifying the signal and on its entry. It is well known that no one knows where the market will go, but a trader should always know how much profit he/she is satisfied with, so once your trade get in profits you should protect your profits with setting up the SL or trailing SL.

This is very sound sense :slight_smile: But it is again only a principle and not a tangible, concrete strategy. I think the concept of “let profits run” might depend on the TF used because it suggests exit is based on a “significant reversal” such as TL break or trailing stop. There is room for this type of strategy on, say, 1H, 4H, 1D upwards where the target is bigger, but there is seldom room for this on short TF like 15M or 5M where the target is near, 15-35 pips, and stops need to be near and therefore get triggered by noise or the market whipsaws in directionless ranging and rapidly wipes out previous profits.

Interesting!
I also did a “theoretical” study of a trading system on a 5min TF using 3 positions: 1 closed at 10 pips, 1 at 20 pips and the 3rd on system exit based on lagging ind. I.e. 2 target exits and 1 reversal. Naturally, the 10 pip target produced consistent results but required sitting in front of screen all day to catch them all. The 20-pip had more stop outs and actually produced slightly less than the 10 pip positions - in other words 2x10pips would have produced more than 1x10 plus 1x20 - and meant less open exposure time per trade and less time staring at screen. On the other hand all the big moves were missed. However the 3rd position gained good profits on the longer moves with 50-80 pips but these are not so common on a 5M TF and in between gained only 2-8 pips plus higher number of stop-losses - interestingly, the end result was again similar to the 10 pips total profit.

Naturally, the actual end results depend on the targets and exits used, but it suggested to me that scaled exits only really benefit on longer TFs and if using shorter TFs like 15M or less then target exits are far more consistent.

But maybe that is all obvious stuff to you experts :slight_smile:

Excellent and very logical principle that makes great sense - thanks for the input :slight_smile:

Thank you, i also prefer to Analyze the Time frames before planning my trades :slight_smile:

Good result in trading is not depending on good entry point only but you must capable to find out timing for exit point because the amount of profit or loss will depend on your closing position too. Good entry point will be useless if you don’t know when is the time for closing position because profit condition could turn into loss or the profit can be reduced. Setting Stop Loss correctly is one from some ways to limit loss as exit strategy.

This is very wise, I think.

Absolutely, and very clearly stated :slight_smile: