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Maybe the better question James is - what are your preferred methods for exiting a trade?  |
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This is probably going to be a vague answer but my exits are done off tape.
First I have a target point in mind where I look to scale out half. This is automatic. Previous day high/low,
POC,
VAH,
VAL are all good target points. However, with futures a rotation puts the odds in your favor significantly compared to momentum based breakout strategies. (yes I have ben burnt many times playing breakouts) Therefore, I have a fixed target based on the tendency for price to move by a certain amount before profit taking or retracements. This is different across all markets. For example, I expect the Nikkei to move by at least 4-5 ticks upon entry. Hence, this is my first target point where I scale out half automatically.
If price can not meet this target and meets resistance off the tape I will exit immediately. Second half is discretionary based on tape. If price meets resistance but I am seeing buying interest step right back in on the bid, I will hold my second half. If buying interest is not sufficient to take out the ask, (sellers keep stepping on the ask) I will exit right as the bid gets thin. I want to make sure to be able to exit as the bid instead of waiting for the bid to become the ask. This is because the tick size on the big Nikkei is big. Now, this observation and technique is only valid when bid/ask is thick and tick value is big. Might be a good way to determine selling and buying pressure on the S&P but not the mini Dow.
The trick is to understand how to identify support and resistance levels. What are significant levels? I think new traders struggle to understand this basic analysis method. These sort of bid/ask action doesnt take place at random levels but key levels. What makes traders attracted to these levels? Why are these levels so important? etc...