[AmCan1]

Interesting thread. I agree that exiting a trade is the hardest part to trading. It is the artsiest part to trading. Lots of great advice so far. Here is what I do that seems quite effective.

I like to get out at a dynamic fixed target with part of my position, and trail a stop on the rest. I typically use a 3 bar stop.

My fixed target is calculated by the trade setup itself, and is therefore going to adjust to current market conditions. I use price action for my trade decisions but indicators to calculate my targets and stops, so they adust, trade after trade. So a 35 pip fixed target in the cable on one trade could end up being just an 18 pip target on another, for example. It will tune itself to the current market conditions, in other words. If the trade doesn't make it all the way, I have a level where I adjust my risk or lock in a little bit of profit. I will exit both positions at that level. I like this better than some sort of artificially imposed goal of say, 20 pips on every trade. As expressed in earlier posts on this thread, the market might not have enough juice to get 20 pips, or it might have too much juice and greater potential then would be missed. A dynamically tuned fixed target works to solve this problem on a trade to trade basis.

Then, if I do get my full fixed dynamic target, I will then employ a 3 bar stop to my trailing position. A three bar stop is a simple concept and easy to trade. It takes the guess work out of the decision and turns an artsie part to trading into an objective rule set. Simply put, using a long trade as an example: If a bar closes with a higher low, I count that as bar 1. The very bar to its left is bar 2. The next one over to the left is bar 3. I put my stop 1 tick below the lowest bar, 2 or 3. I make a minor adjustment around key levels if those levels are where the stop would be (0's and 5's). I don't move the stop until a new bar closes with a higher low than its neighboring bar to the left. Then that bar becomes #1 and I count back again. I keep going with that process, moving my stop up to a tick below the lowest point of bars #2 or 3, resetting my count with every bar that closes with a higher low than it's immediate bar to the left. That's the basic idea. I find it gets me out of the trade most of the time (nothing is perfect as we all know) right where I want to be out of the trade. You can visually see this working on any chart or timeframe. I'm not saying it's the best way to go on all charts and timeframes. But it is worth exploring. You will learn much from the idea.

I can miss bigger moves sometimes, but that's the way it goes. I use a reentry strategy to get back in if need be. I also have certain setups where I could scale in more as the trade progresses but I would treat them as separate trades in that I still will go to my dynamically established fixed target, and trail the rest with the 3bar technique, tuned from the scale-in setup itself, and not the primary trade.

Hope that helps. Let me know if you have any questions about the 3bar and I'll try to explain it with a chart posting.

[cuttshot]

I personally have tried many different techniques for exiting trades. Going for a fixed target has produced the best results for me by far. Just because I say fixed targets doesn't mean they won't ever change. I want my fixed targets to reflect current market conditions. This may sound like adjusting targets defeats the idea of fixed targets but I'm not adjust targets on a daily basis. If I see volatility picking up over a period of time then I will make adjustments to reflect those changes.

For example, the NQ has been a very active market over the past number of weeks. I decided to push my targets out from 3 to 3.5 points to try and capture a slightly larger piece of the moves. While this may not seem like a big change, I'm using more of a scalping approach so getting 2 extra ticks on each trade really does make a difference in the bottom line.

The problem I have with trailing approaches is I find most to be way too discretionary. This can lead to me second guessing myself many times. For me I would rather have a set plan in place that I can stay disciplined to. I really like AmCan's 3-bar stop method. If I were to trail this would be an idea I would look into. It provides a framework that you can follow each time.

[AmCan1]

Cuttshot makes an excellent point. Fixed targets for me, are fixed for that particular trade setup and will adjust with current market conditions. So one fixed target might be different than another, depending on the parameters of the trade itself. Trailing stops do require a competely different mindset. If you have a two position trade where position one comes off at the 'fixed target,' the odds are that the trailing stop will not do as well on most trades. But, if it catches a bigger move, every so often, that could really make a big difference to your overall performance. You have to track the results and compare over time. I have seen where a trailing stop has out produced my fixed targets, say on the Russell emini. But if you look back over the past several months, at least with my method of trading, the fixed targets have outperformed the trailers. There just hasn't been enough larger moves during my trades. So in hindsight, maybe just a 2nd larger fixed target, to exit my 2nd position might have been a better approach. The markets are always changing though and you need to be very careful not to curve fit.

[priyanvada]

Hope that helps. Let me know if you have any questions about the 3bar and I'll try to explain it with a chart posting.

I Wish to know more about this ... So I request you to please post some charts and illustrate lil more about your 3 bar stop method!

Thanks,

[WorldTrader]

Today was a great Trading day for trailing. I really want to trail more, but I like the fact of the fixed targets. I will show you what I use for trailing. It is not a 3 bar stop but one of my indicators. Let me know what you think. You can see after the first fixed target, your stop on the trailer was at breakeven or slight profit, so that is good too.

[priyanvada]

Thanks!

Your chart really looks so beautiful with so many stars in it! ... I am curious what are they shining there for ?!

Anyways I saw in your specific case after the price hit the fixed target it bounced back to hit it again three times during the Next half an hour, ... So if for half an hour profit is not running at all ...it seems a lots of mental torture for a day trader because possibility that things may reverse anytime during that period ...

On the other hand your trailer stop has caught bigger reward than the fixed target and thus getting bigger RR...

So it is again a real dilemma again what to go for... Dyno-fixed target with more probability of hitting it or trailer stop with higher RR but relatively lesser probability of achieving it successfully everytime?

[Tradewinds]

Originally Posted by keymoo »

I preferred style of trading is to scale in on longer term charts and then look for an all-out exit. I much prefer this over all-in and scale out as it is less risky.

This is my preference also. But I hadn't thought about something until just now. Why do I find the exits easy? Huh, strange. I guess I view it as, "Oh! The market has just decided to give me lots of money! Okay. Thank you! I'll just take my money now." Could I get twice as much money sometimes? Maybe. Maybe not.

I wonder what the statistical analysis of scaling in and all-out exit is? Scaling in probably reduces your draw down stats. Staying "all in" until a good exit probably maxes out the profit potential. If you scale out to early, that decreases your profit. If it's a winning trade, why scale out? Especially if you can get out at break even at worst case scenario.

[SIUYA]

Originally Posted by Tradewinds »

I wonder what the statistical analysis of scaling in and all-out exit is? Scaling in probably reduces your draw down stats. Staying "all in" until a good exit probably maxes out the profit potential. If you scale out to early, that decreases your profit. If it's a winning trade, why scale out? Especially if you can get out at break even at worst case scenario.

all depends on the strategy really. Some strategies work best scaling in, others scaling out.
Only historical stats can really tell you this, and then you get into a whole other kettle of fish of then how many do i scale in or out at at different levels??
The other thing to take into consideration is - does scaling work for me - does it make sense, does it make sense with the way I am trying to trade and my ideas of the market. If it looks great on paper but you cant do it mentally then so what.
Like everything in trading its another trade off and no correct answer, if you can automate it 100% and test it then you might have some idea.