Entries vs Exits

[Soultrader]

	Quote:	torero
	I think it's harder to learn to exit properly than entries, because are a few ways to enter (price or indicator signals) but tons of ways to exit (normal stops, percent or dollar trailing stops, SAR, stop loss, etc). I'm still learning to how to stop properly. Psychologically speaking, exits are harder to take than entries. Learning to use a simple stop loss is a major step for any trader. And learning to stay with a trend is even harder for any experienced trader. Even most traders from Market Wizards admit they tend to exit too early.

Very true torero. Although I have exit rules of partialling out, I must admit I still exit too fast at times. One dillemma I currently have is based on singles vs homeruns.

I have rules of partialling out 3/4 of my position. The problem lies in the last quarter position. After capturing 20 points on the YM, I try to aim for 30-50 points on my last quarter position.

The problem is that such moves are the exception and not the norm. Everytime I try to hold onto my last quarter position, the markets will tend to reverse. This loses two opportunities in my opinion:

1. Paper profits disappearing.
2. Can not get in on the reversal since I am trying to ride out a trade.

However, when I try to exit my last final positon discretionary at +20-30 points, I often miss the big moves of 70+.

Just another classic example of trading emotions in play. Greed plays bigger role than fear for me.

[torero]

My trades are not that complicated... yet. I have one entry and 3 possible exits: stop loss, target and trailing profit stop, whichever comes first. Although my bias sometimes is the target itself: should I take profit at target or let the market take it higher. Sometimes it works sometimes not. But my limitation of holding it longer is restricted to my inability to be physically there the entire day to babysit it so have to take what is given to me. Having a target gives me a reason to take the trade, but it's also a hinderance to letting it run. A dilemna indeed.

[ezduzzit]

Hmm.. an interesting thread to be sure. However, let me suggest that they are equally important and that you do yourself a dis-service to think of them in any other manner. Also, I think it is not really a question of having to buy a ticket to win the raffle as someone earlier quoted.. I mean I assume we are talking here about the "timing" of entries and "timing" of exits, not whether you are psychologically capable of ever pulling the trigger to get into the trade in the first place as I think that is a different topic altogether.

If you are a rules based trader (and I hope you are, unless you are truly clairvoyant) then you have specific reasons and locations based upon risk/reward, money management and proximity to support and resistance areas to enter your trade, in addition to your high-probability set-ups. Your exits can also be rule based but I suspect many traders are more focused on trying to bleed the maximum amount of profit out of each trade. Therein lies the rub and the quandry.

If you are like Torero and cannot be constantly at your computer to manage the trade and jump out when the going gets rough, then your exits probably have to be strictly entered as formal targeted profit stops or else. However, if you are a full-time daytrading desk jockey then you are probably caught up in either holding a "runner" to grasp that rare and unexpected big final run in price (even though it is with the tiniest portion of your contracts risked in a given trade) or you are like others who move their stop loss up to breakeven plus 1 or better earlier on (giving you essentially a "no risk" trade) and you are letting your whole position ride in an attempt to garner either a fixed amount of profit or else as much profit as possible with the bulk of your position.

I think we obsess over capturing those final tail-end profits for two rather obvious reasons. One is greed for the maximum possible profit and the other is to avoid that feeling of loss we get when we get out with our "reasonable" profit only to watch the market zoom much further ahead after we exited the trade. Is a bird in the hand truly worth two in the bush as the old quote said? Should we grasp a reasonable and sure profit and not worry ourselves over those rare instances where we got out too early? Or are our trading lives truly financially dependent upon our participating in all or even most of those rare run-ups and deep declines that go on a little longer than anyone expected? Do we truly need to go after those additional ticks on our tiny "runner" positions even though more often than not we screw up the exit timing and that position eats its way back into our expected profit? Are there really exact and final answers to these questions? Do our lives as traders totally depend on capturing the maximum profit in most instances?

Frankly, if we have done our homework on our trading plan, we already know how much profit we need to capture on average each day, week or month to make trading a continuing worthwhile endeavor. If that is the case, and we are capturing an acceptable profit already, do we truly need to drive ourselves nearly bonkers over getting more? At some point the challenge disappears and the stress takes over.

Hopefully, most will agree that there are sufficiently good reasons to give both entries and exits our full and undivided attention and not unnecessarily worry ourselves about which is the more important. If we keep allowing ourselves to get caught up in these conundrums they will serve to slowly diminish the pleasure we get from trading to where it eventually becomes just too stressful and we begin to burn-out. If you do this for the pleasure as well as the money, as I do, then give this idea some serious thought before you obsess too greatly over the timing of your next trade, especially the exit.

Happy Trading

[feb2865]

My following statements are completely subjective. They're based solely on my own experience It’s not the holy grail neither the absolute truth of trading

You guys are talking about exits. Please don’t narrow you vision in just that, look at the bigger picture.

I struggled for many years with exits. Believe me , I used all kind of strategies, methods, etc. Looking at the bigger picture, I realized one day that not only exit rules but the whole trading strategy, method system whatever you want to call it becomes very much like fingerprints. I could say that exits, as opposed to entries, requires far more practice and concentration. I could say that I ‘expect� the market to reach certain at certain speed, if not I am out. But you could disagree with me. Tell you what, it works for me but not necessarily will work for you. Took me years to find out what really works form me and it’s exactly what I said above.

I play the market. I am not at the mercy of the market once I get a position. When I am trading, I become a little arrogant in my own space. I am in this business to make a buck people, not for a charitable cause. The market MUST give me what I want or simply I am out. Will the market care? Of course not. Will I care?. neither. The market is not my friend and I’m not his friend either. Will this work for you?. .probably not But has worked for me for many years to the point I presently trade for the fun of it(yes fun but I will always try to make a buck anyway .)

When I lose, I am satisfied. I did the best I could but I understand that trading is a game of probabilities. We are speculators. We expect the market to move in our direction But there’s no guarantee. Everytime you enter on a trade, your stake is at risk. Let your position mature for a period of time but keep your head up. Please draw this rule on your forehead and practice it . It’s a truly game of balance that takes time to master.

Either I win or lose, I simply shut down my computer and go somewhere else. There’s plenty of stuff to do besides trading. I don’t care if the market blasted off after I killed my position. Good for them. Good for me that I reached my objective, at least my money is in my pocket, and not in some other’s lad pocket

For instance, John Carter has some excellent seminars at CBOT. The thing is, the trader who will benefit the most form his methods is…yes John Carter. After all it’s his baby and that baby spits dollars for him I am sure. Will his strategies work for you?? Maybe yes, but maybe you go with something like…�I like his strategy but I don’t make sense of the squeeze� Pick what’s work for you and leave the rest to Mr. Carter and his own game. Yes it’s good to have a mentor. But they can only show you the way you have to open the door with your own little hands.

After all this years, there’s something I strongly believe will never go out of style: Support and resistance.

No matter what your entry/exit method is, the more your get at hand playing these levels, the better trader you’ll become.

If you look at one of my charts, you will have in your eyes a truly resemblance of a stack of sliced ham. Yes I slice the market. I pre-arranged everything the night before. I even make a little script on what I expect from the market, including of course, Pre-determined possible entry/exit marks and economic calendar for the next day, in order to keep my ear on the ground. Does it work for me? Yes, more often than not. Will they work for you? You need to find out.

Raul

[Soultrader]

Very interesting comments guys. A trader clearly needs to understand why is he trading and what he wants out of trading. Feb and Ez... your comments contain strong beliefs on how you view trading.

As I gain more experience trading, I appreciate whatever amount of dollars the markets can give me more and more. I am definitely not emotional as I used to be when missing a move. My daily goal is 30 YM points and I am 100% satisfied with getting just that.

	Quote:	feb2865
	After all this years, there’s something I strongly believe will never go out of style: Support and resistance. No matter what your entry/exit method is, the more your get at hand playing these levels, the better trader you’ll become. If you look at one of my charts, you will have in your eyes a truly resemblance of a stack of sliced ham. Yes I slice the market. I pre-arranged everything the night before. I even make a little script on what I expect from the market, including of course, Pre-determined possible entry/exit marks and economic calendar for the next day, in order to keep my ear on the ground. Does it work for me? Yes, more often than not. Will they work for you? You need to find out.

Good thing you mentioned this Raul. I also firmly believe in this. Two things I can always rely on will be S&R levels or pivots and tape. As long as a trader has these two skillset on lock, with the proper money management one can expect longevity in trading. Its interesting how plain simple methods will never get old.

[ant]

Trading based on Support & Resistance would never go out of style because it's focus is on finding where a market will encounter supply and demand. Supply and demand are at the heart of what markets/auctions are all about. However, the art is in determining where supply (resistance) and demand (support) will come into the market. For that, there are as many approaches as there are traders (e.g., TA tools and indicators such as pivots, Market Profile, fibs, moving averages, Elliot Wave, Gann, etc). Most of these tools have nothing to do with determining where supply and demand will enter a market (most are arbitrary equations really), and they only work because they tend to be followed by many traders (i.e., a self-fulfilling prophecy). So I don't know if any of these tools will stand the test of time. Having said that, I am of the opinion that Market Profile and auction market theory do a good job at determining supply and demand. At least it is the most objective and most reliable tool that I have found that works for me.

[drk1t]

Both! Like asking which is more important the heart or the liver? I enter a position only because it looks like there is potential to make enough to justify the cost of trade (in and out) and enough to justify tying up the capitol for the time I'm holding the stock and hopefully to make enough to more then make up for losses and keep the lights on another month. I think in terms of percentages and if a trade is going my way I'll let it run sometimes, sometimes I don't, it just depends on what else is happening at the time, once again a percentage of the amount of capitol tied up and at risk. I also will hold over night if I think circumstances justify it. So all in all, I guess the entry and the exit are of equal importance to me.

[protrader]

i would say the exit is most important for the fact that capital preservation is one of the first trading rules. if you dont protect it you will not be around very long. and with good exits you can be wrong on more than 50% of your trades and still be profitable.
have a good and profitable day....