Trading and when to exit?

The Barbarian Investor · 30 January 2005

hi all,

realising that the majority of people on this site are traders and not buy 'n' hold type of people, let me then ask-

"as a percentage (%) what would you look to as a profit goal (% wise)for your exit strategy?"

I currently hold 2 reasonable stocks, 1 achieving 15.91% on my original investment- it may go up further..but?

the other achieving 7.57%, i think it has growth left in it, albiet slowly, and agian ...but?

I'm just interested in what you would set as a profit stop (%) before being happy to take your money and move onto a stock you see has more growth potential or is undervalued..

tech/a · 30 January 2005

Your question is very very important and one which everyone who wishes to be profitable MUST understand for without the answer your trading BLIND you have no idea if holding or Selling will ultimately be profitable over the long haul.

There are a few here that would Im sure like to answer your question before I do.I dont wish to be seen as dominating.(Ok OK Im dominating!!)

DTM · 30 January 2005

Price movement via candle sticks normally dictate my exit strategies. With options, 25% profit is where I will start taking some of the profits out, but again dictated by price movement artyman: . With calls, normally will exit if trade moves against me 25%. With Puts, 10%. This is because the market is largely bullish.

With shares, have a few specs, only profits are kept in so they are put away for a rainy day.

artyman:

Warren Buffet II · 30 January 2005

The Barbarian Investor said:
hi all,

realising that the majority of people on this site are traders and not buy 'n' hold type of people, let me then ask-

"as a percentage (%) what would you look to as a profit goal (% wise)for your exit strategy?"

I currently hold 2 reasonable stocks, 1 achieving 15.91% on my original investment- it may go up further..but?

the other achieving 7.57%, i think it has growth left in it, albiet slowly, and agian ...but?

I'm just interested in what you would set as a profit stop (%) before being happy to take your money and move onto a stock you see has more growth potential or is undervalued..

Hi The Barbarian Investor,

I guess it depends if you invested on those 2 stocks thinking about fundamentals or you are just speculating. I invest in the long run but when a stock is giving me a profit above any prefer stock index I will take the money and move to the next one.

Regards,

RichKid · 30 January 2005

tech/a said:
Your question is very very important and one which everyone who wishes to be profitable MUST understand for without the answer your trading BLIND you have no idea if holding or Selling will ultimately be profitable over the long haul.

There are a few here that would Im sure like to answer your question before I do.I dont wish to be seen as dominating.(Ok OK Im dominating!!)

VERY IMPORTANT POINT YOU'VE EMPHASISED TECH!! IMO, from my brief perusal of Van Tharp, exits are one of the big things that most average investors undersestimate or misconstrue. Personally, I've lost more money due to bad exits (or non existent exit strategies or poor execution of exit strategy) than any other single thing in my trading and I'm sure I'm not the only newbie to have done that. As for profit targets I do have figures (% return etc) in mind but that is only a small part of the story.

Can't see anything wrong with you contributing more TechA, only issue was the occasional vitriole but we've done that to death now (I hope!). I think you mentioned something about exits somewhere else on ASF techA, might have to do a search for it folks.

RichKid · 30 January 2005

DTM said:
Price movement via candle sticks normally dictate my exit strategies. With options, 25% profit is where I will start taking some of the profits out, but again dictated by price movement artyman: . With calls, normally will exit if trade moves against me 25%. With Puts, 10%. This is because the market is largely bullish.

With shares, have a few specs, only profits are kept in so they are put away for a rainy day.
artyman:

I'm in the process of doing something similar to you DTM: let 'profits' run (literally) and take out capital in some stocks. Derivatives are different too. I also bail out completely in other types of stocks when my profit target is hit and there is no incentive to continue. All depends on your overall mgmt plan and your personal goals, it all has to mesh.

brerwallabi · 30 January 2005

Its not all percentages, yes it would be great if we could use our capital and sit back and get a 20% return aye much better then Oz 5.25% bank interest rate. My expectation is not to achieve a % target but obviously I work out what my profit is as a %, sometimes a gain of 5 cents may be my goal, in MUL for example 0.003cps was a target. Obviously a 5 cents gain in NAB is not going to win me an increase in my capital unless i bought half a mil's worth and then I would wonder why i would only have a target of only 5 cps on NAB. If a share i purchased was approaching its previous resistance then that might be my exit point it was calculated in dollars not %'s and is certainly not held to make a % gain, most of my trading is buy at the bottam amd get out 1st resistance point,sure i miss breakouts and opps, but it is my plan. You can bank dollars u cant bank %'s. Thats my say for the day.

tech/a · 30 January 2005

It doesnt matter much how you exit.
But what does matter is as the question I think asks "when do I know I have enough to exit"

There is an answer to this dilema.
but to answer it you need to know a bit about YOUR trading.

There are 2 ways to increase your profit.
(1) Win more often that you lose.
(2) and or have much higher winners than losers.

If you are winning more often than your losing then you can accept a smaller reward to risk.
If your longer term then chances are youll win less but have greater size wins when you do as youll stay in a trade longer than your short term counterparts.

But what you MUST KNOW is your RISK,your WIN/LOSS RATIO and MOST CONSECUTIVE LOSERS.

Is it possible to be profitable without absolutely knowing these things??

Sure and if you are currently profitable then in advertantly you have either one or both in place,but as you have no long term record of your trading results you cannot be definative in the viability of your methodology.

But by using the principles of Positive expectancy youll be in better position than those who have no idea of the concept.

Hope this helps.

Incedently the idea of letting pure profits run is indeed excellent,Much like having an investment property Freehold.I know of one trader who has his "Stable" of profits and adds to it with wins,some in the stable are added to many times others very rarely or never.When he needs core capital he liquidates those which are added to least and which have least working profit.

This is a great idea and one worth thinking about.If the stock continues to rise you keep profiting,while your core capital is working on finding another,(This would have worked very well for me with CTX as my system had me exit in low $8s and its now $11+) To lose all your profit it has to be delisted.
I think however a stop on loss of open profit should be in place though(Personal veiw).

My veiw is this is more about money management than defining when to take a profit.
DTM would you like to elaborate on how you do it.

tech

The Barbarian Investor · 31 January 2005

Thanks to those who have taken the time to reply so far, 1 of thestocks is speculative (15.91% and sitting at 0.51 i'm hoping it will reach 0.55-0.60 and have a 'trigger' set to sell at 0.55)

The other at 7.57% i'm hoping will also go higher, however it may do soover a longer term..

DTM · 31 January 2005

tech/a said:
It doesnt matter much how you exit.
But what does matter is as the question I think asks "when do I know I have enough to exit"

There is an answer to this dilema.
but to answer it you need to know a bit about YOUR trading.

There are 2 ways to increase your profit.
(1) Win more often that you lose.
(2) and or have much higher winners than losers.

If you are winning more often than your losing then you can accept a smaller reward to risk.
If your longer term then chances are youll win less but have greater size wins when you do as youll stay in a trade longer than your short term counterparts.

But what you MUST KNOW is your RISK,your WIN/LOSS RATIO and MOST CONSECUTIVE LOSERS.

Is it possible to be profitable without absolutely knowing these things??

Sure and if you are currently profitable then in advertantly you have either one or both in place,but as you have no long term record of your trading results you cannot be definative in the viability of your methodology.

But by using the principles of Positive expectancy youll be in better position than those who have no idea of the concept.

Hope this helps.

Incedently the idea of letting pure profits run is indeed excellent,Much like having an investment property Freehold.I know of one trader who has his "Stable" of profits and adds to it with wins,some in the stable are added to many times others very rarely or never.When he needs core capital he liquidates those which are added to least and which have least working profit.

This is a great idea and one worth thinking about.If the stock continues to rise you keep profiting,while your core capital is working on finding another,(This would have worked very well for me with CTX as my system had me exit in low $8s and its now $11+) To lose all your profit it has to be delisted.
I think however a stop on loss of open profit should be in place though(Personal veiw).

My veiw is this is more about money management than defining when to take a profit.
DTM would you like to elaborate on how you do it.

tech

Hi Tech/A

Hard to elaborate as most of it is pattern recognition. For example, looking at the XAO (2.17pm) its around 4104 and climbing. It opened at 4097 and I expect it to close around where it opened. Another example is AMC, I've just bought $7.00 Feb call options on it and expect the price to rise in the next couple of weeks. Sorry I can't be more clear than that but it comes from seeing price patterns during intra-day price movements combined with candlesticks. When the price moves towards the peak is or where I think it would be, I sell out before that point. If the price moves against my expectations than I exit.

The Barbarian Investor · 6 February 2005

15.91% and 16.76% respectively..at Friday

however, as i read more and more on this site the share trading at 15.91% (PCG) has been 'channeling' and i could've bought and sold at the highs and lows...making a better gain. the stock at 16.76% (ETR) i think still has strength to continue upwards (?)

The Barbarian Investor · 6 February 2005

ETR (1 month)

tech/a · 7 February 2005

This is a great and important topic one that should be discussed more.

Here is a thought provoking read.http://www.arbtrading.com/entry.htm

tech/a · 7 February 2005

DTM.

I meant how you use your sell and then hold profits.Basically a free trade.
Once "freeholded".
Anymore input from others on exit?

kpgduras · 30 March 2005

tech/a said:
DTM.

I meant how you use your sell and then hold profits.Basically a free trade.
Once "freeholded".
Anymore input from others on exit?

IMHO there are many exit signals that we can use and could be put into your trading plan. These are some that I have come across:

1. A cross between two moving averages of different time durations, e.g. a 36-week MA and a 12-week MA
2. A downwards-sloping trendline
3. A falling momentum indicator, especially at a historically high level
4. A predetermined percentage amount is reached.
5. A pre-set dollar amount is reached.
6. A series of lower lows and lower highs
7. A support or resistance line is reached.
8. A time stop is reached.
9. A trailing stop line is reached.
10. Depending on timeframe traded, last week’s (for example) lowest price is reached.
11. Failure to push upwards through round dollar values, e.g. $1.00, $1.50, $2.00, etc.
12. Heavy relative volume when a share moves downwards in price
13. Longer black candles than white candles
14. Low relative volume when a share moves upwards in price
15. Many candlestick tails are pointing upwards
16. More black candles compared to white
17. Share prices closing underneath an upward sloping trendline
18. etc etc………

kpgduras

The Barbarian Investor · 1 April 2005

I set a stop loss as a price..with PCG i had a 0.32% stop loss trigger set, being 30c at a purchase price of say 44c

i exited my position at 55c (had a goal of 54c) in hindsight as i said, an upgrade of my stop loss to a profit stop may have been better..

a set % would give you a dollar value anyway, a excel sheet wherein you punched in a entry price could give you an exit price(stop/loss) or if you decided what you could afford to lose on the trade and set a loss point from there..

if you inputted the figures from a support line and the price a share was trading at above it a similair sheet could give you the exit price expressed as a percentage if it hit that support line..showing your stop loss point..

just thinking aloud here (rambling)

:goodnight

kpgduras · 2 April 2005

The Barbarian Investor said:
a set % would give you a dollar value anyway, a excel sheet wherein you punched in a entry price could give you an exit price(stop/loss) or if you decided what you could afford to lose on the trade and set a loss point from there..just thinking aloud here (rambling)

I have attached an excel spreadsheet I'm using for the share game where I use a 5% stop loss and try to trail my original entry as I go along. Any criticism would be appreciated as I am seriously considering going back into share trading within the next 12 months.
kpgduras

Wysiwyg · 19 December 2009

I spent a consecutive 8 hours + today playing with exit strategies and it is surprising how no one strategy works best. That is because whatever exit is made, it is the following price action that has us judging whether it was a good exit or not. Also surprising is the limited information available in comparison to the most important part of trading/investing.
This dudes site has some easy to understand explanations of exit methods.

WHEN TO SELL By Brian Shannon

There are seven events that should motivate you to sell. These events can be best described as:

Initial Protective Stop
Gaps against the prevailing trend
Price Targets
Hard Trailing Stops
RealTick ® Trailing Stops
Moving Average Crossovers
Time Stops

The most difficult decision for a trailing stop is how much room to allow the stock to have. I think it is sort of like going fishing. If you have a big fish on and you tighten the line too much the fish is sure to break off and you never get to taste your reward.

Trading and when to exit?

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