Hey all,
I’m wondering how you all plan your trade exits? What’s your secret sauce?
Are you looking to hit a certain amount of pips?
Specific R:R?
Maybe you use an indicator to plan your exit?
Favorite chart pattern?
I’m thinking about maybe tweaking my current RSI rollercoaster strategy (daily charts) that Kathy Lien let me borrow (thanks @dpaterso).
Try every system, analyse and find the most profitable. Or you could ask kathy lien.
I’ll give her a ring after dinner. Thanks!
Hello @dudebro
Imo exiting a winning trade is by far the most difficult part of my trading strategy and to this day is the area of my strategy that I spend the most time on.
My strategy is based on allowing a winning position as much drawdawn capacity as possible to run while trying to maintain a balance between actively reducing risk by trying to move to b/e as quickly as possible.
I don’t use a set r:r or tp because I dont want to cap profits and I dont believe in predicting future price.
My exit strategy takes a number of variables into account such as market conditions, direction of the long term trend, current price action patterns and price reaching new s/r levels and testing those levels.
If my entry is with the longer term trend i try to delay moving my sl to breakeven in order to allow my position more room to eventualy run.
If my position is against the longer term trend I try to move my sl to breakeven a bit quicker and I tend to close at least a portion of my position if price breaks out.
At any point during an open position especially if that position is against the trend, if price action gives an entry signal in the opposite direction i’ll close the entire position or ill at least close a portion and move my sl to breakeven.
I am currently using TA patterns to signal manual exits. The ones working well under current circumstances are (for long positions) -
exit at any close below the 3EMA (excluding the first full day in the position)
exit at the third consecutive higher close
exit at the close on the 5th consecutive day with higher highs and higher lows
Of course there is an initial stop-loss: I’m currently using at -3ATR20 and this is not trailed.
Basically; I set my SL & TP based on neatest support & resistant levels!
A very worthwhile question, as exit strategies are both important, and overlooked. As Mark Douglas writes in Trading in the Zone, one of the habits of a consistently profitable trader is paying yourself as the market makes money available.
To a certain extent, the best exit strategy depends on your trading strategy, and your time-frame. When I was trading compressions on the GBP H1 charts, for example, I was looking to capture brief, explosive moves. Fixed targets are very good at this, but they are also quite unforgiving; getting too greedy means losing everything. So, each month I would review my trades and re-calibrate stop, entry, and profit levels to stay in tune with the market. Most months, this was a modestly profitable approach.
On moving up to the D1, and expanding the range of currencies traded, this approach was too cumbersome. Each pair wanted different settings, and news events (both scheduled and unscheduled) can extend or retard the expansive movement I am looking to capture on the larger time-frame. I therefore divide each position into two orders. The first order has a modest fixed profit target, while the other order simply uses a trailing stop based on the ATR. This lets me lock in some profits early, but also gives me a chance of capturing a longer movement.
I did look seriously at using a fast moving average to close out trades (as suggested by @tommor), but time-zones mean that I’m typically managing my trades an hour or two before the candle closes. The high/low of the day is pretty clear (and if it isn’t, then the trade is moving in my direction anyway), while the close is still uncertain.
A trade exit pretty much depends on your trading style. You may use RSI or any other overbought/oversold indicators to exit before the price goes in the opposite direction. You may backtest and check the optimum TP level. One thing you have to do is to decide when you exit before you enter.
You are right; especially overbought/oversold is the most popular one in this case!
I’m want to do this, because like you side, you limit yourself by just randomly setting an R:R. But I don’t think I have the full grasp of this. Say you’re trading the dailies, is it enough to be making the decision to close my trade at say market close, or do I need to be more flexible about the time, which means I need to monitor the trades more often?
These are very specific. Is this just based on your experience over the years? Or maybe things working for you recently?
This is kind of like Kathy Lien’s RSI rollercoaster system I’ve been using. Well, from the trade management side, exiting half of the position at 50% of the risk and immediately moving the stop on the rest to breakeven.
I don’t actually move the second stop to break-even (although I have considered it); I let the ATR stop eventually pull the second position into profit. This is because it is not uncommon for price to test a breakout level before going further, and moving my stop to break-even would get me kicked out of the trade by such a situation.
These are recent rule variations but the principle has served me well - when I have been able to stick to it!
But the rules only make sense if its just one small trade in a trend which comprises lots of similar small trades. These things have to be in context.
I also suspect that the forex markets are more prone to trend failures since the Brexit referendum result. This may not always be the case, so these rules might one day need to be made a bit more ambitious - again, according to context.
Oh dear gods, this.
I was happy being quietly profitable on my GBP pairs until Brexit. And they couldn’t just sort it, could they? Noooooooooooo, they had to drag it out for as long as humanly possible. And longer. And then they asked for an extension, because they wanted to go even longer.
lol
So I started looking at how to trade other pairs, because I was tired of getting stopped out by some shambolic speach by Thersa May.
I’ll keep this in mind. Maybe a tweak I can play with.
So no more GBP at all?
Context is the key. Thanks!
Take it easy fella! Go with the flow. May was always going to change her mind in a tight spot, and back away from issues, and always always delay delay delay. Made so much money on the crashing pound! Johnson is helping a lot too, give him credit…
@tommor I’m not really all that bothered. I think the faux humor is simply a way of distracting from the fact that the price movements we follow actually mean something, or say something about the real world. When a country’s economy is tanking, we make money shorting their currency, but that fall in price represents hardship for many, many people.
It’s a bit grim, to be honest.
@dudebro I do still trade the GBP, but more cautiously. I’ve moved up to the D1, which is better able to weather a news event, and I pay more attention to the political calendar than I do on other pairs. I was out of the market prior to the announcement of Boris as the new PM, for example.
A bit self-righteous perhaps. You must have seen that as one currency in a pair rises dramatically, the other falls equally hard. Such is life.
I do not feel that this is a fair characterisation of what wrote. I do not believe that it is particularly righteous to note that the events that drive price movements have an impact on the real world as well as on our charts. Sometimes this real world impact is positive. Other times, not so much.
And I was careful not to associate the price movements, in and of themselves, with either a positive or negative outcome. There are all sorts of reasons why currencies move up or down in relation to each other, and many of them are very positive. What I actually said was that when a country’s economy is tanking the fall in price represents hardship for the people affected. I would not have thought this observation was contraversial, and am certainly surprised to see it characterised as ‘self-righteous’.
Fair enough.
My goal would be to keep the position open as long as possible but if price action gives a counter signal especially if my position is against a major trend I would def consider closing the position at end of day.
Lots of good info and ideas are being thrown around here, ive enjoyed reading everyones replies. Heck of a thread @dudebro