One of the biggest questions that I keep asking myself is, are exits more important than my entries? I feel the answer to this question is yes they are. Overall does not do you any good if you are constantly breaking even on all of your profits and losses. If you are unable to get out of a trade at a reasonable price your losses will always be too high cutting into your profits. This is what sets the professionals off from the rest, their exit strategies. This is more than just a money management plan. Exits are just as strategic as your entries. Exiting a trade can be determined on so many factors, S/R, BB, News, Trends, and so much more. It not so much about winning on huge trades it is about losing a little on the trades you lose. Like golf, the one who wins is who misses it the closest.
There isn't a single factor about a trade that isn't important. It's your money on the line! Your exits should be logically related to the kind of trading you are doing. For example, if you're following a trend, you should exit when the market gives evidence that the trend is ending, whereas if you are doing something with mean-reversion, you should have a price in mind which is the "mean" to which the market is reverting and exit there. Of course, then there are all of the exit criteria you need to develop for a trade that goes against you. I have different exit strategies for long, short and continuation trades. You want to make your strategy as granular as possible, by identifying specific market processes that recur over and over and managing trades within the confines of those processes.
Different exits may make the strategy winning or losing, but entries, which provide the edge at all are still more important, because without good entries, managing exits will not help you. I don't think random entries work no matter how good your exits are. So my opinion is: entries are #1, exits are #2.
Corninforex is absolutely right. The entry is more important. One other way to view this is at the entry and exit form a union. They form a special combination that produces the profit. You can't have an entry without a planned exit. I mean we couldn't test it. So, this secondary view states they are indivisible. You can't have just an "entry" by itself, you have to exit to test the trade and the exit and the entry define the rules of the trade. One thing I've noticed is that I tend to think in combinations whereas the novice is thinking linearly or looking for truisms. The truth is that almost any advice you hear about in the market can work when used as part of the right combination. 99% of the ways any technique one can think of to work will not work. While having an edge when you enter ultimately decides your basic profitability, you are correct that I've found I've improved a great deal by thinking about various exit combinations. The beginner tends to enter the market for whatever reason but doesn't take into account any new market information into his plan. The most difficult part of trading is to take into account new market generated information into your trades. This is something that experts aren't good at either. However, you are wrong about what makes great traders. Yes, they've learned to manage risk. But, they also tend to size bigger on their winners. They tend to focus on their winning trades. One can draw an an analogy to your concept and poker where the player is required to pay blinds each around to play. One difference between poker and trading is the trader doesn't have any cost (except for opportunity cost) of being out of the market. Trading would be more like your concept if you were forced to make trades on a regular basis. But nobody forces you to make trades: therefore focusing on maximizing your best trades is a better strategy and is what divides the good from the great.
Knowing when you are beat is important. It SHOULD be synonymous of exiting a trade. Its as important as entries....
I think Lucias just explained it the best way. Entries and exits are not something separate to be compared, only a certain combination of them makes a good or bad trading strategy. For example, I like to enter on EURUSD support/resistance bounces using a very tight (6 pips) stop and trying to let the profit run (more or less successfully ). This setup has a proven edge for me. But what if I suddenly go insane and use 100 pips stop-loss instead of 6 while still taking profits in my usual 8-20 pips area... Would that strategy still sound good for me? Doubt it.
Your psychology is #1 and the main part of the system. Why or how would you trade it effectively if you didn't believe it? Isn't any trade you make at anytime based upon what you believe a probable outcome to be? Edge isn't determined by entry it has multiple factors of which entering is only a small part of a profitable system. Looking at entries most aren't much better than random. Although it's old and the drums been beaten 1000s of times. No matter where you enter, how good you believe it to be, and it may be working from the get go rarley. The only thing you have control over once in a trade to minimize losses, and take profits is the exit strategy. If this isn't true which I don't believe, why then do winners become losers, why do small losses become large losses, why do initial losse become smaller? It all boils down to one thing exit strategy and beliefs relating to trading based upon that. As far as your opinion on entry vs exit no matter how good, I read that Richard Dennis had taken some trades at one time based upon that debate. Entry was determined by a coin toss to go long or short, and exits managed by some strategy don't recall what. The result were that it was possible. Check out LeBeaus work on the significance of exits, he's been at it 30 plus years, and has even taught workshops on designing systems and the importance of exit criteria. I believe the importance people place on entry is solely a psychological issue. It's the importance one places on the control you have about where you enter. After entry though each trade in and of itself is entirely random as far as outcome. Please don't confuse random entry or my belief in random outcome, as one that has the markets being random. Probability may place the odds in ones favor based upon past experience, testing, etc. However the trade could setup exactly as before, in the same market, on the same day, with similiar events. The outcome could be different as the time, and the participants, and how they react will not be exactly the same as before. Enough and have a great weekend all!
Well, I would say it's the reverse. I believe in my system, because it has proven itself to be profitable with certain outcome probabilities. I don't believe system becomes profitable only due to the fact you believe it is.