exit strategy

[barjon]

afternoon all,

Last year my New Year's resolution was to try and improve my exit strategy since I felt I was leaving to much on the table and failing to get near the potential of the swing trades I had entered. My usual strategy up to then was to exit when the last swing low/high was breached. The attached chart of a trade I'm in at the moment shows the dilemma and how a trade with the proven potential of nearly +60 could finish up barely breaking even.

In pursuit of my resolution I have experimented this year with different strategies including fixed target exits; market action; trailing stops: various indicators etc but none seem to have proved wholly satisfactory.

Any thoughts?

Good trading

jon

ps: there's some commentary at the bottom of the chart in case you don't spot it first time

 

[roguetrader]

Hi barjon, nicely taken trade mate, what was your target on the first entry? Seems to me that as you essentially have 2 trades on in this stock they should be managed seperately. if you view them this way I would say the first trade warrants a tighter stop than the one you are using for the whole position, might evens say would it not be reasonable to have exited the first trade

 

[barjon]

rogutrader

took half the first @ 598 and moved stop to be, thus ensuring +14 on that. The rest's still running.

jon

 

[bracke]

Good Afternoon barjon

Have you considered using the the price relative to the 200 dma as a gide to buy/sell.

Looking at the Aviva graph suggests that when the price is approx 15% above the 200dma it pulls back to the 200 dma line. Whilst not foolproof ( nothing is ) it may give you better results than your current method.

Regards

bracke

 

[jsd]

hmm, the exit is what takes the money either from you or from others.. there will be lots of different opinions on exit as with entry and the whole of the remaining trading concepts. You maybe have to tie it in with what your risk to reward objects are within your time frame of holding a position, i assume ? swing traders by their title are not focused or concerned with riding the trend? which will result in you having to be willing to assume greater (potential/likely) pull backs that may happen within the trend.

I dont know the stock and cannot see the bigger picture to the left any reaction previous at the recent high? christmas money in the bank this coming week/thin market ? 1 : 3 risk/reward? your at those levels now and beyond . channel boundaries and a return to average? sell into strength some say is that what swingers do ? would you want to do that ? whats the weekly chart look like?

no good kicking yourself either way, but if in DOUBT EXIT NOW, take your money, research a bit further .

who are the best swing traders and how do they exit ? close the first and let the second run ? would that fit in with you ?

define your exit and stick to it when in the position, again if in doubt , close out , you'll have a free mind to get focused on the task in hand. If it tanks either way... how would you feel ? I missed more money? why didn't I close in profit? dont beat yourself up with it either way.

You will be acting in your best interest recognising to close now when in doubt is the sensible? professional? Someones paying you to go away and learn a bit more with this trade maybe, take it and study.

Just opinion of course,

best wishes.

jsd

 

[roguetrader]

rogutrader

took half the first @ 598 and moved stop to be, thus ensuring +14 on that. The rest's still running.

jon

Seems like a plan. It has in my experience always been a good plan to lock in profits as you go along.

 

[barjon]

bracke - you're suggesting closing when it gets 15% (say) away from 200 ema? I'll have a look but I'm doubtful. In this one AV has recently broken out after being range bound for about 8 months and if (maybe a big if) it represents the earlier days of a strong upward move I would expect it move quickly and significantly away from a slow ma like a 200 day.


jsd - thanks, I've tried several of the possibilities you mention and I was hoping for comments in relation to some of your others (eg:how do the best swing traders exit).

For this particular trade I adopted the same tactics for the addition (second trade) as I mentioned earlier to roguetrader in relation to the first one. ie: I closed half the second position @ 618 for + 11 and moved the stop to breakeven and the stop on the remaing half of the first position to this level. Both were targeted closures based on the risk of each entry.

Thus, I am protected from AV heading south (although would exit still well short of the maximum potential**), but if it continues north I will only have half positions running which could prove costly in terms of the potential gains that could have been realised.

** 1st trade 2 points realising 1 @ + 14 and 1 @ + 23 = + 37
2nd trade 2 points realising 1 @ + 11 and 1 @ 0 = + 11 Total = 48

Max potential 1st trade 2 points realising + 82
2nd trade 2 points realising + 32 Total = 114

( Would you consider this a satisfactory result or would you have expected to get closer to the potential?)

good trading

jon

 

[TheBramble]

In pursuit of my resolution I have experimented this year with different strategies including fixed target exits; market action; trailing stops: various indicators etc but none seem to have proved wholly satisfactory.)

barjon - I understand your situation, but leaving something on the table is not such a bad thing. Otherwise it smacks of trying to pick tops & bottoms.

You could look at each stock/index you trade and backfit what would have been the best exit criteria for each trade - and they're unlikely to be the same - even within the same instrument.

The methods you have (and are) trying seem to be really among the best.

You could always exit on a close below your highest low (for a Long) and above your lowest high (for a Short). You wont always capture the whole move, but you can always go in again if the indications are still OK.

 

[barjon]

Tony

Thanks. I agree that trying for the tops and bottoms is a fools quest.

However, in the original example +1 when the maximum potential was +60 is leaving a veritable feast on the table and +48 from +114 would be leaving a pretty hefty meal also. (The maximum potential has increased this morning as AV has shot up). Admittedly I have given a selective example, but I have often provided meals like this and although I'm not an ungenerous soul it does seem a bit much.

regards and good trading

jon

 

[dbphoenix]

In pursuit of my resolution I have experimented this year with different strategies including fixed target exits; market action; trailing stops: various indicators etc but none seem to have proved wholly satisfactory.

When you say you have "experimented", have you tested various combinations of these variables on old charts to see which yield the greatest profits and under what conditions? If not, it could take a good long while to arrive at any hypotheses.

 

[barjon]

When you say you have "experimented", have you tested various combinations of these variables on old charts to see which yield the greatest profits and under what conditions? If not, it could take a good long while to arrive at any hypotheses.

dbp

Some to a reasonable degree - on 100 or so old trades - others less so, but none I suspect with the degree of rigour and thoroughness that you would demand

I doubt somehow that there is a "fit all" solution since much seems to depend on the characteristics of the individual instrument. For example, some which have moved smoothly are suited to a trailing stop whereas others of a more volatile nature are not. Maybe I should split my stable of runners into individual "characteristic" boxes but just because one may have exhibited those characteristics in the past doesn't necessarily mean it will continue in that vein.

good trading

jon

 

[dbphoenix]

Not sure what you mean by "degree of rigour and thoroughness would demand". Either the data answers your questions or it doesn't. If you're not getting the answers you want, I'm only suggesting that you re-examine the questions you're asking.

For example, if you're trading one contract, or one share, your options are different from those you would have if you were trading three contracts, or three shares. If you're trading multiple contracts or shares and you trade all in/all out, your options are different from what they would be if you were to scale in and out. Ditto with whether or not you're swing trading or trend trading, whether you have targets or not, and so on.

As for the sample, 20 trades per set of variables should be enough, but it's up to you to decide which variables you're going to test. It's just the old tried and true "scientific method".

 

[barjon]

Not sure what you mean by "degree of rigour and thoroughness would demand". Either the data answers your questions or it doesn't. If you're not getting the answers you want, I'm only suggesting that you re-examine the questions you're asking.

.

dbp

Just a gentle leg-pull based on the degree of work you often indicate is necessary . As you often say, too, there are no short cuts.

regards

jon

 

[dbphoenix]

dbp

Just a gentle leg-pull based on the degree of work you often indicate is necessary .

Wish I could find a way around it.

 

[TheBramble]

Not sure what you mean by "degree of rigour and thoroughness would demand". Either the data answers your questions or it doesn't. If you're not getting the answers you want, I'm only suggesting that you re-examine the questions you're asking.

For example, if you're trading one contract, or one share, your options are different from those you would have if you were trading three contracts, or three shares. If you're trading multiple contracts or shares and you trade all in/all out, your options are different from what they would be if you were to scale in and out. Ditto with whether or not you're swing trading or trend trading, whether you have targets or not, and so on.

As for the sample, 20 trades per set of variables should be enough, but it's up to you to decide which variables you're going to test. It's just the old tried and true "scientific method".

It's my view this is an unnecessary complication.

barjon is looking for an exit strategy that gets him out of his trades without 'leaving so much on the table'. The intricacies of scaling in/out of a trade at this juncture are counterproductive.

What would be useful is for barjon (or anyone) to find a workable solution to this problem (i.e. one that can be implemented tomorrow).

One which although may not clear as much theoretically (eventually, if at all) as a multi-faceted, systematic, scientific, thoroughly research-based approach to all types of instruments and types of trades that will be completed in a year's time approach, will be one which he can use tomorrow and leave him time to make a cup of tea/coffee between exit criteria revisions and review.

He's looking to exit his trades - not write a thesis on how to construct optimum exit criteria.

barjon - please, keep it simple. Hypotheses are for people who write trading books - actual exits - tried & tested - is what puts bread on the table.

 

[dbphoenix]

What would be useful is for barjon (or anyone) to find a workable solution to this problem (i.e. one that can be implemented tomorrow).
.

So, given his requirements, what is your suggestion?

 

[TheBramble]

So, given his requirements, what is your suggestion?

Check post #8.

 

[dbphoenix]

Check post #8.

I got the impression from his reply (#9) that he was looking for something more, but apparently I misunderstood.

Sorry.

 

[TheBramble]

I got the impression from his reply (#9) that he was looking for something more, but apparently I misunderstood.

Sorry.

Not necessarily and no apology required. We're all traders here.

Had barjon adopted even my most basic offering his profit levels would have been better.

What I was cautioning him against was assigning his total efforts to an extended study of theoretical evaluations of exit criteria when clearly, it's a tweak he needs - not a 'back to school and start again' approach.

The puritan that lurks within us all will have us delaying pleasure indefinitely if we don't take control.

I totally support your position on the need for on-going research and study - but trading is nothing if not a visceral activity into which we plunge heart & soul. Otherwise it's just a pale intellectual exercise.

Dusty hypotheses - in and of themselves are from another animal altogether. And useful as an adjunct and not a replacement to our trading and our trading research.

 

[dbphoenix]

Not necessarily and no apology required. We're all traders here.

Had barjon adopted even my most basic offering his profit levels would have been better.

What I was cautioning him against was assigning his total efforts to an extended study of theoretical evaluations of exit criteria when clearly, it's a tweak he needs - not a 'back to school and start again' approach.

The puritan that lurks within us all will have us delaying pleasure indefinitely if we don't take control.

I totally support your position on the need for on-going research and study - but trading is nothing if not a visceral activity into which we plunge heart & soul. Otherwise it's just a pale intellectual exercise.

Dusty hypotheses - in and of themselves are from another animal altogether. And useful as an adjunct and not a replacement to our trading and our trading research.

Since he's already scaled out half, I assume that some sort of scaling approach is preferred. But, again, I may be misunderstanding the objective.

As for "dusty hypotheses", there can be no research without them. But, again, this seems not to be what is wanted. My purpose was not to initiate a debate on the most profitable means of exiting a position.