Entries vs Exits

[DugDug 10]

Kiwi summed it up nicely - you need to match the style or system.

 

If you are Warren Buffett - Entries are clearly more important, as he never/rarely exits a trade.

 

What about the systems that are always either long or short - then their exits are their entries and their entries are their exits.

 

Personally I feel exits are more important as - there is only one entry, and two ways to exit either with a profit or a loss.

On saying that I have done a little bit or research in some of my discretionary trades and realised that if I improved my timing on the entries a little bit (basically by being more patient) then the exits also improved. Go figure

[robertm 10]

I'm going basically with what Kiwi & DD said.

 

Longer term systems on say weekly charts you can be less accurate on the entry as it's a bit like turning around a loaded oil tanker if you are going with the trend - it'll happen eventually but it'll take time. Shorter term getting entries right can be more important if your risk:rewards are lower, and also dependent on how you measure your stop from entry (for which ATR is an excellent measure even if you use other methods).

 

Entries can be exactly the same as exits (ie, x period high/low above/below MA) if you choose, it just depends what works for you

 

Having a clearly defined entry will keep you working within your framework of trading rules more than anything else and stop you jumping into trades just because you have some free heat/risk capital or haven't had a trade signal for a while.

[thalestrader 14]

I will disagree with most. The cause of this disagreement is the work I've been doing on systems for short term trading. And considerations of longer term holds.

 

Neither entry nor exit is more important; in general.

 

 

Both depend on what you are trying to capture and thus, for best results, must compliment each other.

 

Example1: You want to capture the big trend. So your entry should be designed to get you in at a point where your stops have a high probability of keeping you in the trend. Your exits will have the same in mind. Your entry, if you'd used a PT/Stop of 1:1 might give a poor profit factor but you don't care if it gets you into the move at a point where trailing stops can work for a long hold even with a 25%-35% win rate.

 

Example2: The classic high probability scalp where you want to win 80% of the time but are prepared to accept a sub 1:1 reward/risk perhaps. Here you don't care if you are in a place in the larger move that is indefensible with trailing stop - what you care about in an entry is that it has a very high probability that PT will be reached before S is reached. In an exit you might just have a target and stop. Or you might aggressively pull the stop to BE+.

 

But in each case it is the combination that delivers the desired outcome - not the entry or exit alone.

 

Kiwi,

 

I think that if you were to consider the logic of each example, and the desired outcomes, in each case, it is the exit, not the entry, that provides the participant with that for which he or she is hoping.

 

Best Wishes,

 

Thales