So where do you make YOUR money?

ok, so I'm a bit grumpy this morning

Hands up those who make money on their entry. No-one? Thought not because your money comes from your exit

So why is everything about entry, entry, entry with relatively little about exit. After all, there's many a good trader who have shown that they can make money on random entries, but I've not heard of any who have succeeded with random exits.

good trading

jon

No-one is making money with random entries as has been discussed umpteen times.

It's an interweb trading myth. Otherwise, everyone would be entering at random. Do you enter at random yourself Jon? Of course you don't.

Entry is of utmost importance.

toastie

I'm not saying entry is unimportant, but whether you make money from that point or lose it depends absolutely on your exit. As is how much you make or how little you lose.

Oh, btw, it's not a myth. Jack Basso, amongst others, springs to mind.

jon

whilst the exit makes the money, the entry technique determines your risk.

a good entry, based on your trading worldview, helps you to minimise the amount of adverse movement before the trade comes good. That is, entry allows you the point at which your decision proves correct or wrong, quickly.

barjon said:

toastie

I'm not saying entry is unimportant, but whether you make money from that point or lose it depends absolutely on your exit. As is how much you make or how little you lose.

Oh, btw, it's not a myth. Jack Basso, amongst others, springs to mind.

jon

Click to expand...

Jon

The only way random entry will make money is if the thing you trade trends for long enough periods for you to recoup your bad trades and you have an exit method that keeps you in for much of the remaining trend.

In other words, just like any simple purely technical method it relies on specific market conditions.

If you really thought random entry worked - why are you not profitable trading a random entry system right now ? Are you not yourself looking for good entries just like most other people ?

DT

Exit is more important in my view.

For me, I'm not sure how I'd decide which was more important. How are you supposed to tell, exactly ?

Fluff either and you'll lose money.

I do like a trade that goes into profit from the moment you get in though. I also like the fact you have a choice about entering...

DionysusToast said:

Jon

The only way random entry will make money is if the thing you trade trends for long enough periods for you to recoup your bad trades and you have an exit method that keeps you in for much of the remaining trend.

In other words, just like any simple purely technical method it relies on specific market conditions.

If you really thought random entry worked - why are you not profitable trading a random entry system right now ? Are you not yourself looking for good entries just like most other people ?

DT

Click to expand...

toastie

I wish I hadn't included the bit about random entry . To get it out of the way I'll concede without more ado that it's all tosh.

The point is that, however good your entry, it is only the starting point. You get nothing for starting the race and it's the exit finishing point that brings in your money (or limits your loss ).

Many a good entry - in terms of overall direction - results in a losing, break-even or minimal profit trade set against the potential in the move if you haven't got your exits right.

I don't think you'd disagree that it's all about risk and reward in the end. Whilst - in our different ways - we look for entries where we think we can run a relatively low risk set against the potential reward, it is our exits that finally determine how well we do.

jon

trendie said:

whilst the exit makes the money, the entry technique determines your risk.

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I don't understand this. I have an entry point. It is just a point of price. This doesn't determine risk. The risk is determined by when I will exit if it goes badly. So for me it is the exit that determines the risk and the exit that determines the realised profit or loss.

DionysusToast said:

I also like the fact you have a choice about entering...

Click to expand...

This is a much bigger tool for the retail trader than most people give credit to.

Peter

"What gets you in, gets you out" is a simplified 1 sentence version.
Apply this to a simple trend following methodology, employ a filter to keep you out of sideways chop.
All price action based.

My two cents, before I rush out the door.... Trading is very much like a contact sport. Infact, if I had my own way, no one will be allowed to trade until they have gone a few rounds in a boxing or MMA ring - wait what am I saying? ... then there will be no one to scalp!. I must be getting soft these days ...

Seriously though, if people were forced to go a few rounds in a ring before trading, it will render almost almost all books on trade risk management useless. One can only take so many jabs to the face and uppercuts to the chin before the hands instinctively go up when you ENTER the ring, and those damn hands won't come down until the round is over or the fight is over, i.e. until you are EXITING the ring. I really don't know why people make trading out to be such a difficult thing - maybe they are suckers for punishment?. I seriously believe that pain is a very useful learning tool for traders. I remember when I first started trading options I looked at all the sensitivity charts and understood it at an intellectual level. After getting seriously hammered by the market, I have an EMOTIONAL connection to the charts, when I see an ATM option near expiry with high gamma, I literally wince - because I know how devastating that can be to ones account.

Trading is like fighting, once you ENTER the market - ITS ON, and it dosen't stop until you have exited the position(s). If you did not do enough research about your opponent before you enter the ring, the flurry of hooks, jabs, overhand rights etc that will meet you will soon tell you that you should have done more research. personally, I don't like (receiving) pain, a nosebleed (i.e. a number of points loss) is enough for me to retreat and throw the towel in - so I can live to fight another day - AND you can bet your bottom dollar that the next time I ENTER the ring, I would have done my research THOROUGHLY. The rule for entry is basically this - do not wait for the market to prove you wrong (by that time, its too late). If the market dosen't behave as you anticipated shortly after ENTERing the trade, don't wait till the market suddenly moves 10 points against your position - you'd already been KO'd by then. Take, a small loss consistently and keep you powder dry so that you will be alive and full of "rude health" when the market is there for the taking.

Exits are also important, because you can still get clobbered on the way out. Again, its a case of choosing your battles carefully and running aware like a scared rabit if you need to. Basically, as they say in contact sports - "protect yourself at all times" - if you follow that advice (consistently), you will do just fine

IMHO A good trade has good entry & good exit - this is what I strive for. I suspect that the unprofitable trader may have poor quality in one or both. Notwithstanding any of that, a good exit is essential for survival and used correctly will ensure a bad entry isn't life-threatening.

So yes, exits are probably more important but if you can get both right then life is so much easier (and more profitable). It's a mistaken belief that all you have to do is get a magic system that tells you when to enter - but isn't that the common myth peddled in the popular press etc? Also, if you can get a good entry you can still make a decent profit even if your exit isn't the most elegant - try doing that with a duff entry that was unprofitable from the moment you clicked the button. I rate all my entries: assess their quality, analyse why they were good bad or indifferent, and take suitable remedial action. Since doing that my profitability has improved because I now have a routine and disciplined approach. It pays.

Entries and exits are a bit like flying a plane - it's quite easy to get it airborne (entry); the difficult bit is getting it back on the ground in one piece (exit).

Also random entry CAN be profitable.

Shakone - every one of the 95% think random entry can be profitable, yet none of them are trading it.

Do you trade a random entry system yourself ?

Random entry with a long holding period is simply a trend following system that will only work under prevailing market conditions (i.e. a market with long trends and little chop).

Of course, if you were convinced that market conditions were going to be like that, you'd be a fool to use random entry because you'd just go with the trend.

Random entry = nonsense.

Shakone - every one of the 95% think random entry can be profitable, yet none of them are trading it.

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Do they? Every one? Haha. I think you're writing nonsense again. Many of the 95% couldn't even define what it means to be a random entry system never mind believe in it. I'll tell you why they aren't trading it below

No-one is making money with random entries as has been discussed umpteen times.

It's an interweb trading myth. Otherwise, everyone would be entering at random.

Click to expand...

You have a logical flaw Dionysus. If I can make £X a day with a random entry system, and I can make £5X a day with a good entry, why would I trade a random entry? I wouldn't. I'd be stupid to. That doesn't mean random entry can't be profitable, just because it is not used and is sub-optimal, and there is a better way. Why do you make a ridiculous assumption that everyone would be doing it? Don't you have a system/method for trading that could be profitable but that isn't nearly as good as the one you trade live? What would you think about someone who said that your other system can't be profitable otherwise everyone would trade it? It's silly isn't it.

Here's the point. Random entry CAN be profitable. People don't use it, because ...
they can't , they'd lose... exits are even harder than entries. Random entry with fixed stops and targets isn't likely to be profitable. Random entry with someone who understands the market involved and can decide quickly if he is on the wrong side or not, and cut his losers and run his winners, can be profitable. Random entry can be profitable, but the kicker is, it is just as hard or more hard than being profitable by finding a good entry.

It has nothing to do with trend. It has to do with how well and how quickly you can recognise whether the trade you're in will go your way or not. Consider someone who has a large edge. And when he gets a signal to trade he flips a coin and has to enter in a random direction. If he sees it is the wrong direction, he exits immediately or as soon as the trade is breakeven If it is the right direction he trades as normal. Can that be profitable despite the random entry? I think so.

I like the Henry Ford quote:
"Whether You Think You Can or think you can't, You are Right"

"And when he gets a signal to trade he flips a coin and has to enter in a random direction. If he sees it is the wrong direction, he exits immediately or as soon as the trade is breakeven If it is the right direction he trades as normal. Can that be profitable despite the random entry? I think so."

So what you are saying is a random entry system is put together as follows:

1 - We need a trader who can trade outright positions profitably
2 - The trader makes a conscious decision as to the markets direction
3 - The trader flips a coin and enters the market based on the coin toss
4 - If the coin toss disagrees with his opinion of the market direction from step 2, he exits the trade
5 - If the coin toss agrees with his opinion of the market direction from step 2, he stays with the trade

I particularly like this bit " he exits immediately or as soon as the trade is breakeven "

Great to see wishful thinking playing it's part too.

What you have written is not a random entry system. It is a play on words only. It is total nonsense.

The REAL random entry + MM system works like this.

1 - enter the market on a coin toss
2 - trail your stop loss

In a market that trends, the bad coin tosses will be stopped out but the good coin tosses will see you staying in for the move because of the trailing stop. This relies on certain market conditions.

Random entry systems do NOT rely on having a profitable trader on hand to exit positions as soon as they have been placed to take the randomness out of them.

DionysusToast said:

Jon

The only way random entry will make money is if the thing you trade trends for long enough periods for you to recoup your bad trades and you have an exit method that keeps you in for much of the remaining trend.

In other words, just like any simple purely technical method it relies on specific market conditions.

If you really thought random entry worked - why are you not profitable trading a random entry system right now ? Are you not yourself looking for good entries just like most other people ?

DT

Click to expand...

To make money from a trade, one thing is certain, one must exit in profit. That seems an obvious thing to say but it seems that this fact is being ignored. If direction is correctly assessed, the trade will end successfully.

Therefore, it is no good entering a trade without trend direction sorted in one's mind. Therefore, random entry does not make sense to me. If the entry is random, the exit must be pot luck, too. You may think that it is planned. In fact it depends on a random entry. The trade has been built on a dodgy base.

I'm just giving an example. A random system could be made in lots of ways.

As for the breakeven comment. He may be able to do better than breakeven, even when he thinks it is the wrong way. Ever had a trade that after you entered, you soon knew it wasn't going to work out, and managed to exit at breakeven or better, rather than let it hit your stop? I have. And I'm crap.

What you have written is not a random entry system.

Click to expand...

It enters, it is a system of entry, and it has randomness. You're right, it is not a random entry system.