Exiting a trade is as important as entering it

[15 min tlb]

Does it happen to you that you are in an open trade and the price is oscillating near your entry point and you think that the price is changing the direction? And as far as you close the trade the price continues to go in your direction?

Exiting the trade prematurely
This means that you have an opinion about were the price is going, you think it’s going in the opposite direction, don’t you? This is the same as having an opinion on the entry point. Successful traders, especially trading teachers say that trading based on your opinion will lead you to losing money. And when a trader loses money trading based on his opinion he starts trading someone’s trading method or system. Maybe you have managed to train yourself not to open a trade impulsively, but you didn’t realize that exiting a trade is as important as entering it. So if you want to become a consistent winning trader, you have to follow all your rules, not just a part of them.

My personal experience
When I first started trading, I was opening and closing the trades without any trading plan. I didn’t have a trading strategy. Later I’ve learned about the entry strategies, because all the authors of the books were talking only about the entry, very few were talking about exiting a trade. After a while I’ve learned that I should put the stop, but I was actually placing it where I was feeling comfortable with it. It took me a while to learn where to place the stop, but I’m still having troubles exiting my trades at the profit targets, because I close them before they reach it.

Saying “With the next trade I’ll follow my rules”
When you see that your trade hasn’t achieved the profit target yet, but only a half of it you may say “I’ll take this profit and the next time I will wait for the profit target to be reached”

On the next trade you may even have the self-control to wait until it reaches the profit target but it arrives near the profit target and then turns back and stops you out. You will be blaming and asking yourself why you didn’t close it when it looked like that the price was changing direction. Doing this may cause disastrous consequences. You’ll not get the expected results, or you can even lose the money in your trading account. But even worse, you’ll enforce your bias that you should exit the trade when you think the price is changing direction, but remember that you can’t predict the market. This behavior might be very difficult to correct.

Treating entry strategy as something magical
Traders think that there is something magical about the entry strategy, but closing a trade is as important as the entering the trade.

Let’s assume you’re in a trade, your profit target is 10 ticks and the price is just 4 pips from your target, you decide to close it because you believe that the price is changing direction.
Let’s assume that you have a signal to enter the market and the price is just four ticks away from the entry.

Will you enter the market 4 ticks below your entry, anticipating that the price will go in the direction you think? Most of the traders will not, unless they are completely new to trading. So we should treat our exit points as the entry points. We should follow our trading plan.

What we tend to do when we buy a trading system? We tend to take in consideration only the entry strategy but not the exit strategy. We think about the entry strategy as of something magical, as about something that no one had already seen before. We think that we can take an arbitrary stop loss and an arbitrary target for taking profits and we will succeed. Sometimes the trading systems have a stop loss that we can’t afford we just use the stop that feats us, and maybe we try to use the large profit target that was set by the trading system. If you do so, at least test it, because otherwise you’ll pay for the testing with the money from your trading account.

Solutions
There are more solutions to this problem. You can reward yourself if you manage to follow your rules for a certain number of trades. Or you can punish yourself if you don’t succeed to follow your rules. You have to be sincere with yourself.

When I told the master trader I’ve taken the private tutoring with, that I have this kind of problem he said that I should punish myself by not trading for one week if I don’t manage to follow my rules. Although it may be good in some situations I preferred other kind of punishment. I agreed with my workmate that I would offer him the coffee for a week if I’ll break my rules. After offering him the coffee for the entire week, the next week I started to follow my rules.

I was back testing a method .

If you cut your profits with a fixed target of say 10 pips , the profits halved from 3500 pips to 1700 pips a month.

 

[BeginnerJoe]

Sounds interesting, how can you make me rich if I give you the entry method?

Well, give me the entry method and we'll see. If it meets my criteria, I will make you rich. As for how, I will be happy to reveal it to you once I accept your method. Since you, along with everyone else, believe the entry is useless without whatever the exit you have, by revealing the entry to me, you have lost nothing because it is useless by itself.

All I need to see are real trades using your entry method attaining 10 points/ticks/pips paper profit 75% of the time without going into a heavy draw down.

If your entry method helps me make money, it's no big deal for me to share my gains. I can always get more from the market as if it's an ATM.

It takes the experienced not beginners , to know a high probability method.Who am I to judge who is a beginner?

Ok, dewd. It's not as if I am short of people willing to give me what I am looking for. Within half a day I have Barjon and FxHunter showing interest. So save whatever you have got for yourself. Perhaps you should trade them, make yourself the monies, and teach LordFlash a thing or two. He's your detractor, not me. In a lulzy way I am even on your side, not because of sympathy but because of the lulz element..

 

[FXhunter]

I was back testing a method .

If you cut your profits with a fixed target of say 10 pips , the profits halved from 3500 pips to 1700 pips a month.

First of all, congrats if 3500 is not hypothetical and you have a method that gives you such a profit. Sincerely I've stopped searching for such methods. The methods I tested were giving me the maximum of 200-300 pips per month.

You are right, cutting the profit with the fixed target, limits the number of pips.
But even if everybody is advising to let the profits run, I feel more comfortable scalping.

Anyway in my experience by letting the profits run we will gain more pips, but this will also increase the number of consecutive losing trades.
Instead I prefer to have more winning trades and increase the risk I take. For example instead of risking the maximum of 2% of my account I'm risking from 4% to 5% so at the end of the month, the money made will be the same.

Maybe it's wrong to do what I'm doing, but in trading I think that you are not wrong if you are making money.

 

[15 min tlb]

First of all, congrats if 3500 is not hypothetical and you have a method that gives you such a profit. Sincerely I've stopped searching for such methods. The methods I tested were giving me the maximum of 200-300 pips per month.

You are right, cutting the profit with the fixed target, limits the number of pips.
But even if everybody is advising to let the profits run, I feel more comfortable scalping.

Anyway in my experience by letting the profits run we will gain more pips, but this will also increase the number of consecutive losing trades.
Instead I prefer to have more winning trades and increase the risk I take. For example instead of risking the maximum of 2% of my account I'm risking from 4% to 5% so at the end of the month, the money made will be the same.

Maybe it's wrong to do what I'm doing, but in trading I think that you are not wrong if you are making money.

It is based on 2 positions , one letting profits run and the other takes a fixed 30 pips on the first trade , using a 60 % hit rate and 30 % loss rate with 10 % at breakeven.

Letting profits run and cutting losses has to be done correctly ,using an appropriate trailing stop . with context and great entries.It should not increase consecutive losses , as the flaws may lie in the method and system of running profits.

 

[BeginnerJoe]

congrats if 3500 is not hypothetical

3500% demo pips gain per day, per week, per month, or per year is quite common around these parts. Just search for them. People with these methods always want to start funds and trade for other people. To make such real money gains only for themselves would be immoral and against their religion you see ?

 

[15 min tlb]

It is based on 2 positions , one letting profits run and the other takes a fixed 30 pips on the first trade , using a 60 % hit rate and 30 % loss rate with 10 % at breakeven.

Letting profits run and cutting losses has to be done correctly ,using an appropriate trailing stop . with context and great entries.It should not increase consecutive losses , as the flaws may lie in the method and system of running profits.

Adding just 1 filter eliminates 30 % of the trades as low probability , and increase profitability by 40% , reduces losing trades by 25% .I reduced the flaws of my method with a few filters.

 

[malaguti]

If your entry method helps me make money, it's no big deal for me to share my gains. I can always get more from the market as if it's an ATM.

I'm pretty sure you started a thread on how treating the market like an ATM will lose you money..here's a quote

"One of the most common mistakes noobies make is to think the other side of their trade is a dumb and unfeeling ATM, where you could just enter the correct combo of PIN (aka strategy) and monies will come spilling out. Well, the guy on the other side is quite intelligent. If you show him full respect, he can be surprisingly generous in giving you what you have always wanted. The key is respect and not a PIN." :cheesy:

 

[counter_violent]

I think so. I haven't seen a youtube video describing a strat that involves the trader using sleep as a trade management technique.

Yes, it's quite amazing.

When they should be sleeping they are busy doing. Markets sleep as well you know! Is it any wonder they fail when leveraged up in a dormant market only to be taken out when volatility picks up!

Less is more.

BJ, you are without doubt the dimmest light on the christmas tree.

and a happy new year!

 

[BeginnerJoe]

I'm pretty sure you started a thread on how treating the market like an ATM will lose you money..here's a quote

"One of the most common mistakes noobies make is to think the other side of their trade is a dumb and unfeeling ATM, where you could just enter the correct combo of PIN (aka strategy) and monies will come spilling out. Well, the guy on the other side is quite intelligent. If you show him full respect, he can be surprisingly generous in giving you what you have always wanted. The key is respect and not a PIN." :cheesy:

Armed with a 75% entry method, anything becomes possible. But I have a feeling such a method won't be coming my way short of me finding it myself. So the quoted statement remains true. Unless you have an entry method you want to share with me ? I promise I will make you rich if it's good. Isn't it nice and tidy for everything to hang on the entry and no need to worry about the exit and the management ? Trading would become so effortless. You could be out playing golf, doing shopping, even sleeping while the pips just keep rolling in.

 

[BeginnerJoe]

When they should be sleeping they are busy doing. Markets sleep as well you know! Is it any wonder they fail when leveraged up in a dormant market only to be taken out when volatility picks up!

I have slept synchronously with the market, as well as asynchronously with it. Pips did await me when I woke up in both situations. Of course there were times when the market wasn't so generous. But then it wasn't an ATM, you know ? So not being generous was quite normal.

BJ, you are without doubt the dimmest light on the christmas tree.

A woman boss of mine once said my light was hidden under a bushel. It's dim because you are not used to such lights. In any case such lights are exceedingly rare.

 

[counter_violent]

He must be a billionaire by now and trading must be main source of income.

No, you are his main source of income...now keep on paying those taxes.

 

[malaguti]

Armed with a 75% entry method, anything becomes possible. But I have a feeling such a method won't be coming my way short of me finding it myself. So the quoted statement remains true. Unless you have an entry method you want to share with me ? I promise I will make you rich if it's good. Isn't it nice and tidy for everything to hang on the entry and no need to worry about the exit and the management ? Trading would become so effortless. You could be out playing golf, doing shopping, even sleeping while the pips just keep rolling in.

75% entry method with a low drawdown I probably have close to 70% but my trades might be one every few days. Make me rich..now lets be honest here. How many times have I heard that?
If I can find an entry that is as good as I think mine is, so can you.

 

[SlowlyButSurely]

BJ if I were you I would forget trying to get a system and like you said just do it yourself. If the system is not 100% mechanical then it would likely be hard to pick up on the discretionary elements anyway. In the time you would spend looking for then learning the system you could create methods of your own

 

[FXhunter]

Well, give me the entry method and we'll see. If it meets my criteria, I will make you rich. As for how, I will be happy to reveal it to you once I accept your method. Since you, along with everyone else, believe the entry is useless without whatever the exit you have, by revealing the entry to me, you have lost nothing because it is useless by itself.

All I need to see are real trades using your entry method attaining 10 points/ticks/pips paper profit 75% of the time without going into a heavy draw down.

If your entry method helps me make money, it's no big deal for me to share my gains. I can always get more from the market as if it's an ATM.

I've got it. Unfortunately I can't give you my entry method, because I don't think that I will not lose nothing.
If you will trade 100 contracts for example(I don't know what the exact number will be), it will be impossible for me to get filled(if I will use a stop limit order) and I will get in with a slippage if I will use a stop order. And then maybe you will give the method to your friends, your friends will give give it to other friends, and so on. Then I think that the method will become useless.

I don't believe that the entry is completely unimportant. I agree with you that if you have a good entry method, you don't have to worry about the exit so you have to work less on the exit strategy.

In the very first post I was talking about about the psychological part. Because not following my rules caused me to not make the amount of money I would make If I followed my exit strategy. I'm already trading it on a real account. When you trade a method on the demo account you don't have problems with the self control.

3500% demo pips gain per day, per week, per month, or per year is quite common around these parts. Just search for them. People with these methods always want to start funds and trade for other people. To make such real money gains only for themselves would be immoral and against their religion you see ?

Thank you for the info. I'm quite new to forums. When I registered on this forum in 2007 I didn't have much experience to talk about trading. Now even if I'm not making a living by trading I feel more confident and I hope I'm going into the right direction.
This is a great forum, I didn't expect so much activity on this thread

 

[BeginnerJoe]

75% entry method with a low drawdown I probably have close to 70% but my trades might be one every few days. Make me rich..now lets be honest here. How many times have I heard that?
If I can find an entry that is as good as I think mine is, so can you.

Even 70% is acceptable to me. 1 trade every few days would be a bit slow. So you are likely to get rich slower, but still quicker than say, stock investors. But we can double the bet size to compensate. Instead of 1% of account, we do 2%, 3%, or 4%. We can also increase the number of markets to create more opportunities. One trade every few days has its attractions - it means even less work all round. Getting rich with practically no work, I like that.

So would you like a deal ? I just need to see some real trades attaining reasonable paper profits 70% of the time with low draw down.

 

[15 min tlb]

I've got it. Unfortunately I can't give you my entry method, because I don't think that I will not lose nothing.
If you will trade 100 contracts for example(I don't know what the exact number will be), it will be impossible for me to get filled(if I will use a stop limit order) and I will get in with a slippage if I will use a stop order. And then maybe you will give the method to your friends, your friends will give give it to other friends, and so on. Then I think that the method will become useless.

This is a great forum, I didn't expect so much activity on this thread

Forums are places to talk a load of bxxocks .The more people trade your method , the more effective they become .If your followers of your method , act as an army of billions , the enemy will run faster , you will win more times with a scared opponent running in fear , in the battlefield.

 

[malaguti]

Even 70% is acceptable to me. 1 trade every few days would be a bit slow. So you are likely to get rich slower, but still quicker than say, stock investors. But we can double the bet size to compensate. Instead of 1% of account, we do 2%, 3%, or 4%. We can also increase the number of markets to create more opportunities. One trade every few days has its attractions - it means even less work all round. Getting rich with practically no work, I like that.

So would you like a deal ? I just need to see some real trades attaining reasonable paper profits 70% of the time with low draw down.

And I need to know what you could do for me. Right now this is one sided. I have an entry with low drawdowns and an exit that is already doing very well for me, and you have the promises of fortunes..you're not Greg Secker are you?
So tell me BJ, whats your part of this deal. And please dont say its to provide capital. I have a business that can do that already.

 

[15 min tlb]

I will need the drawdown to be less than 10 ticks.

You are destined to remain on t2l for the rest of your life ,another 30 years , with your high expectations .

 

[BeginnerJoe]

I've got it. Unfortunately I can't give you my entry method, because I don't think that I will not lose nothing.

Well, the whole point of a partnership deal is we benefit together rather than being competitors. If I am going to make you rich, then you won't have to trade yourself.

Given that a good entry method is so hard to find, I have no reason to give it away to people. So your fears are unfounded.

When you trade a method on the demo account you don't have problems with the self control.

The difference between a demo account and a real account is that in the real account, you have a guy on the other side of you trade who doesn't like losing money. Given that he's a pro, he usually makes money 100% of the time, if not from you, then from someone else.

So the problem you had was not one of self control, but rather your coming under control of the other guy.

 

[BeginnerJoe]

BJ if I were you I would forget trying to get a system and like you said just do it yourself. If the system is not 100% mechanical then it would likely be hard to pick up on the discretionary elements anyway. In the time you would spend looking for then learning the system you could create methods of your own

I am outsourcing my entry method development in parallel to my own development. The moment I perfect my own method, my offer of making people rich will be closed. Even though the window of opportunity is still open, it won't stay open for long as my own development is approaching conclusion.

This is really a last chance for someone to get on board for the gravy train.