What is your exit strategy?

[R0n1n]

Just trying to find out what other people use as exit strategy ? I am still trying to get mine ironed out..
Do you use an indicator ? or a trailing stop loss. What persentage do u use ?

 

[Sean K]

Re: what is ur exit strategy ?

Just trying to find out what other people use as exit strategy ? I am still trying to get mine ironed out..
Do you use an indicator ? or a trailing stop loss. What persentage do u use ?

I started with a 20% gain but found I missed out on lots of potential gains when stocks just kept on going. I'm now totally discretionary. It depends on the stock and the market. I rarely sell all now after strong gains. Usually I'll sell a third or a half and then see how the stock goes after that. If it keeps going I might even top up again. I rarely enter 100% either. If I see an entry I might get in with just a third of what I would be aiming for with a total committment. If the trade is going OK then I'll add to the position. If it tanks, I sell and minimise loss. The problem with trading like this as a beginner is that you get attached to stocks and without strict rules you will hold stocks for longer than you should, expecting them to bounce back, or not lock in profits by becomming gready. The most important rule though with 'trading' is to not lose money. If a trade goes wrong, get out and save your cash for another day. In summary, I have a 'plan' for each stock I buy and write it down. Then amend as the situation develops. There is just too much to post into a single reply so I'll leave it there for now. I must say, not having a solid plan (like me) can lead to failure. The saying 'Plan your trade, and trade your plan', is a truism. This is not 'investing' of course, which is a whole other story.

 

[R0n1n]

Re: what is ur exit strategy ?

Kennas, thanx a lot for your reply. The problem is for Stop Loss I have 2% set as a hard rule, which means if a stock that I am trading takes a 2 % hit I am out, no questions. BUT, if a stock a going up I donno when it is finished its run and when its time to take profits and exit. Sometimes I exited early and others times I lost out cos I stuck too long with it.

 

[Sean K]

Re: what is ur exit strategy ?

Kennas, thanx a lot for your reply. The problem is for Stop Loss I have 2% set as a hard rule, which means if a stock that I am trading takes a 2 % hit I am out, no questions. BUT, if a stock a going up I donno when it is finished its run and when its time to take profits and exit. Sometimes I exited early and others times I lost out cos I stuck too long with it.

2% seems a bit tight for a stop loss. 5-10% would be more the norm for a blue chip, and wider for a spec. You should probably adjust your stop as the sp goes up, to create a 'trailing stop'. Personally, I use support lines as a trailing stop. If a stock comes back down to support and it's breached, I exit and wait for another opportunity. This works OK with stocks conforming to support and resistance lines in a trending market, like the last 3 years, but during turbulance, this is much less reliable.

 

[tech/a]

Re: what is ur exit strategy ?

Kennas, thanx a lot for your reply. The problem is for Stop Loss I have 2% set as a hard rule, which means if a stock that I am trading takes a 2 % hit I am out, no questions. BUT, if a stock a going up I donno when it is finished its run and when its time to take profits and exit. Sometimes I exited early and others times I lost out cos I stuck too long with it.

I think you maybe confusing Position size risk with Stop loss.
You can still only risk 2% of your trading capital and have a 20% stop on price.
Google Fixed fractional position sizing.

 

[nizar]

Re: what is ur exit strategy ?

I think you maybe confusing Position size risk with Stop loss.
You can still only risk 2% of your trading capital and have a 20% stop on price.
Google Fixed fractional position sizing.

I'll save him the time, does this sound familiar tech

Fixed Fractional position sizing

Lets say for the example you have a capital base of $10,000
and you wish to trade a $1 stock with the lot.
You dont wish to risk more than 5% of your capital on the trade.
So maximum risk is $500.

You like the stock and think that a 5c stop would be best.
So $500/. 05c = 10000 so you CAN buy 10000 with a 5c stop no problem.

Lets say you think its going to fly so you only have a 2c stop.
so $500/.02c = 25000 so you could maintain the same $500 risk and invest in $25000 of shares had you the capital.

OK lets say you wish to use a wider stop can you still buy 10000 shares?
So $500/.20 = 2500 obviously no you cant you must buy 2500 ONLY to maintain the same 5% risk with a 20c stop.

So same maths applies to any position you take.

$15300 capital, 5% risk how many shares can I buy of a stock trading at $1.92c with an 18c stop?

$ at risk = 15300 x .05% = $765.
765/.18c = 4250 shares 4250 x $1.92 = $8160 so you can ONLY buy 4250 shares at an 18 cent risk to maintain the same 5% risk to capital.

Ill go further and talk about Reward to Risk or the R/R ratio.
If you buy and then sell the $1.92 stock for a 54 cent profit you have returned on that trade a 3:1 R/R ratio.
This is calculated by 54c (the profit)/18c (The risk) = 3 so 3 times the risk has been returned.
So if you win 2 out of 3 trades with this sort of R/R ratio then your doing well.

 

[tech/a]

Nizar.

You'll have a Doctorate in Position sizing if you keep that up.
Youve touched on more important information with regard to R/R.
As people can see the greater the R/R the less often you need to have a winning trade.
The smaller the R/R the more often you need a winning trade.
Longer term methodologies tend to have larger R/R ratios than shorter time frame.

Most fnd this boring until they come to realise (normally through losses or frustration of getting knowhere.) that profitable trading cannot be CONSISTENTLY found without correct application of those principles you have explained.

Nice work.

 

[R0n1n]

Re: what is ur exit strategy ?

thanx a lot Nizar. Its very helpful. Clears a lot of points.

I'll explain my earlier question with an example. I had bought ZFX at 16.75 (green line on chart) and took an exit on 17.61 (red line on chart) . ZFX ofcourse went on to make it to 17.90 before finally turning around.

Was there any indicator that would have told me to hang on to the ride ?

 

[Chorlton]

Re: what is ur exit strategy ?

Kennas, thanx a lot for your reply. The problem is for Stop Loss I have 2% set as a hard rule, which means if a stock that I am trading takes a 2 % hit I am out, no questions. BUT, if a stock a going up I donno when it is finished its run and when its time to take profits and exit. Sometimes I exited early and others times I lost out cos I stuck too long with it.

The use of a fixed ratio for a stop-loss (in your case 2%) may not be the most effective method IMO.

My view is that a Stop should be placed at a "logical" place on the chart (such as below recent support for example) rather than just based on a fixed percentage of the cost of the underlying share.

Once the stop has been placed, you can then calculate your Exit level & followed by your R:R, and then finally decide whether or not to enter the trade.

Totally agree with others comments about Position Sizing. This should definately be based on a percentage of your overall capital.

Kind Regards,

Chorlton

 

[motorway]

Re: what is ur exit strategy ?

thanx a lot Nizar. Its very helpful. Clears a lot of points.

I'll explain my earlier question with an example. I had bought ZFX at 16.75 (green line on chart) and took an exit on 17.61 (red line on chart) . ZFX ofcourse went on to make it to 17.90 before finally turning around.

Was there any indicator that would have told me to hang on to the ride ?

You want to profit from the trend
The trend is a series of higher highs and HIGHER LOWS

A good entry here was off the higher low above $16.50
That low by it shallowness demonstrated little overhead supply..

The next low where you exited was still a higher Low
It was still in an uptrend.. Notice the vol subsided...
However this low was a deeper and sharper
But still held above the halfway point of the rally

Still an uptrend ? Why sell ?

Next rally the last is the is the key...

The thrust ( The headway ) that rally makes is a lot less than the previous ones
The thrust has shortened and there is less Volume..

That last low was deeper and sharper . This last rally has less thrust and lower volume.... Maybe time to tighten stops ? or take profits ?

after the the top.. There is volume and the price moves past the halfway point of that last rally.... change of behavior is confirmed

Indicators can not know where in time the rally tops and reaction lows will occur ahead of time...

So the Key is to have a 100% clear definition of trend

A series of higher highs and higher lows..
healthy trend ... wider stops looking out for change of behavior

The thrust of rallies and relative strength of the reactions
and where the volume shows the participation.

When behavior changes..... Tighten stops or take ( some ) profits

You bollinger bands did not give a sell signal at your sell point
But the high did when it did not close above the bands after the previous rally
had.....= shortening of thrust.... demand supply relationship changing..

A trendline would have kept you in as well..
trendlines do know where the reaction lows are because
that is where you draw them.

motorway

 

[svensk]

I base my exits on medium term macd crosses/macd-h divergence. I realise many would not use or agree with this method, but it works for me and is easy to implement.

That, and an initial stop/breakeven stop in the beginning.

 

[happytrader]

Re: what is ur exit strategy ?

thanx a lot Nizar. Its very helpful. Clears a lot of points.

I'll explain my earlier question with an example. I had bought ZFX at 16.75 (green line on chart) and took an exit on 17.61 (red line on chart) . ZFX ofcourse went on to make it to 17.90 before finally turning around.

Was there any indicator that would have told me to hang on to the ride ?

Hi ROn1n

Thats not a bad ROI for the time you were in the trade. I guess you need to ask yourself whether you are a trader or an investor. As a trader you need to be flexible and mobile in mind and action so that you can remain detached, and concentrate on trading excellence. You could sell only a portion of your holding or just keep jumping in and out of trades. Keep moving forward and you are less likely to keeping looking behind you.

Cheers
Happytrader

 

[R0n1n]

WOW ! losts of great info here to digest.

I guess its time for me to find a mentor. Anybody here with lots of experience and some spare time to show me the right way please.. it would be extremely appreciated...

thanx heaps...

 

[CanOz]

WOW ! losts of great info here to digest.

I guess its time for me to find a mentor. Anybody here with lots of experience and some spare time to show me the right way please.. it would be extremely appreciated...

thanx heaps...

I'm into Nick Radge's course, "Building a Profitable Trading Plan Using Technical Analysis", and just starting the exit strategies.

If i had things to do all over again , i would do this course, no questions asked before making a single trade.

Already started developing ideas and testing systems and into a profitable one, but already i can see the importance of the exit in the overall success.

Check out Nick's site:

www.reefcap.com

You also get a few months of personal email coaching, so there's your mentor, and not many on this forum can compare to his experience.

Good luck.

Cheers,

 

[It's Snake Pliskin]

Re: what is ur exit strategy ?

thanx a lot Nizar. Its very helpful. Clears a lot of points.

I'll explain my earlier question with an example. I had bought ZFX at 16.75 (green line on chart) and took an exit on 17.61 (red line on chart) . ZFX ofcourse went on to make it to 17.90 before finally turning around.

Was there any indicator that would have told me to hang on to the ride ?

You may notice the subseqent price remained around the $17.60 level after peaking. You can't get it all all of the time.

 

[motorway]

Re: what is ur exit strategy ?

thanx a lot Nizar. Its very helpful. Clears a lot of points.

I'll explain my earlier question with an example. I had bought ZFX at 16.75 (green line on chart) and took an exit on 17.61 (red line on chart) . ZFX ofcourse went on to make it to 17.90 before finally turning around.

Was there any indicator that would have told me to hang on to the ride ?

Was there any indicator that would have told me to hang on to the ride ?[/

That is a interesting question that leads on to all sorts of other questions
I made the point that indicators do not know where the rally and reaction tops will be... Charts of price Vs time display trends that speed up and slow down..

reviewing some articles on
moved base TA vs Time based TA recently

The problem of periodicity keeps being mentioned ..


eg can a moving average be a foolproof indicator to inform us to "hang on to the ride "

( can any ? )

Moving Averages

Moving averages are the simplest smoothers. Before widespread use of PCs, one could easily keep up the data smoothing with a hand calculator, as the only data necessary for the calculation were the price being added and the price being dropped. That exercise warned users to “Beware the dog that bites twice”, which is to say that the moving average was tremendously affected by not only the new day, but the day being dropped. That “dog bite” problem can be significant in shorter term moving averages. Most traders who have always used computers are unaware of dog bite problem.

Moving averages weight each day the same, and can be performed over moving periods of whatever length and segmentation you wish. By segmentation we mean weekly or monthly, but you could just as easily consider ever-other or every-tenth day. You should also consider weekly averages with the week ending on a day other than Friday.

As stated above, moving averages are the best way to smooth data of known periodicity, and certain market data is hugely periodic.

http://www.fdcusers.com/A Survey Course on Data Smoothers.htm

known periodicty !
major problem in a nutshell

The mkt sets up rhythms only to deliver sucker punches..

Could You pay competitive sport using a moving average of your opponent ?
The superior player .. changes the speed and rhythm He breaks the rhythm.
It is the inferior player that gets trapped in rhythm..

anyone for tennis ?

You have to react to what is happening, when and how it is happening.
In real time ( which maybe is different to the periodicity of the tic tock of the clock )

...Indicators can be improved ...But they still can not know where the rally tops and reaction lows will occur in time

The changes on your chart that matter
march to their own time ..

The question of moved base TA vs Time Based
leads on from this problem of trends changing speed

An old methodology that is still very new at the same time
and an example of moved base TA

is Point and Figure ....

motorway

 

[motorway]

A trendline would have kept you in as well..
trendlines do know where the reaction lows are because
that is where you draw them.

Trend lines are very useful. Very powerful.


motorway

 

[R0n1n]

Motorway: Thanx for pointing out Trendlines and busting the bubble about MA.

can a moving average be a foolproof indicator to inform us to "hang on to the ride "

( can any ? )

True. I guess trading is like a chess game, lots of strategies and games plans that you can use, but in the end it boils down to what Happytrader says: being agile and the capacity to anticipate the other side's moves.

It's Snake Pliskin: thats true.

CanOz: I do have Nick's Book. The money I am trading with was actually meant to be my trading course/books/software money. But I read on this forum that you do not need 10K worth courses and elite software to trade, rather trade with that amount and you learn a lot. I find this very true, although the leassons are harsh sometimes

svensk: can you please give more details about your medium term MACD signals.

Nizar: thanx again on your excellent intro to Fixed Fractional position Sizing, definitely implementing it. I know this is not the first time u have typed it out and probably not the last, but its very appreciated.

Tech/a: I was reading some of ur old posts and u have mentioned that u would be happy to test someones trading system, can I take u up on that sometime ? I am working on mine.. and hopefully will have it sorted sooner. If you think its ok then I will make it as a trading course and sell it at expensive hotels at 10k a pop LOL . Actually I'll post it here once it oked so other noobes like me can benifit.


I have actually copied and saved a lot of stuff that has been said here into my notes.

 

[tech/a]

Supply me with the metastock code and I'm happy to run it.

 

[tech/a]

Just on the trade itself.
It would be handy for you or anyone to have an idea where your were/are in a trade so that you could get an idea what price action was likely to occur.

ZFX is currently in a Minor wave 4 corrective wave in a larger Wave 5 according to Elliot Wave.Provided wave C (The current wave ) doesnt trade lower than the top of the closest wave 1 then the analysis will remain valid.

The likely extension to wave 5 is the first Turquoise and Pink Line and the second the Larger one.Thought it would be interesting to watch.
We are looking for the Blue elipse--the shadow of the ellipse and price to all coincide.

The trade itself when taken was in a corrective phase and one which would be seen by this poster as very low probability (At the time).Not a trade I personally would have taken---much better around.