re-entry rules

Discussion in 'Strategy Development' started by paulus, May 2, 2004.

  1. paulus



    has anyone got specific criteria / rules for re-entering a position
    when trading the trend :
    it happens all the time that one got stopped out only to see the
    market move in the direction in which you had a postion going;


  2. I think it is psychological mainly. Like reversing a trade as soon as the market changes. If the evidence is there- then we should act. But I find it very hard to immediately let go of my bias.

    For example, I enter a long trade at $20, it goes up to $21 and starts to waver, so I start to 'feel' it is going to either reverse or level off, I go flat. I've invested (unknowingly ) some emotion in that decision.
    The market then starts to rise again. Can I immediately get back in? Usually no, I'm stuck with the residual belief that the market might reverse or not go higher, very hard to drop that bias, despite the evidence. And so while I am stuck with this wrong bias the market takes off and I miss out on the trade.

    I think this is one of the factors that separate the real pros from the rest of us. They have that ability to react almost instantly to what is really there, they don't cling to an opinion.
  3. paulus


    thanks roberk,

    there's definitely a psychological aspect to it but by defining
    clearcut rules as under which conditions one has to re-enter
    one might reduce the psychological problem to some extent;
    unfortunately i did not find those rules yet;

  4. Paulus,

    It sounds like you already have a method to enter the first time. Can't you just apply it to re-entering? If you don't , then basically what you're looking for is a whole trading method.

    All the best,

  5. I find that there are no simple reentry rules. It depends on many things including the trendiness of your trading vehicle and the reliability of breakouts under different conditions so I would expect to set up specific rules for each different thing I traded.

    Also the reentry rules would depend on what happened before your exit. I have different rules for choppy trends, strong trends and thrust. If you do the work then they will become apparent to you.
  6. Hi Paulus,

    Can you post a chart of a trade you took in a only get stopped out for either a loss or breakeven or a small profit...

    I call this pick pocketed

    To then see it reverse back in the direction of your trade without you on the train???

    In my opinion, the key to a good re-entry signal (contingency plan) is your original entry, where you got either stopped out or exited the original entry, the duration that elaps between the original entry and the re-entry signal.

    Via the latter above...the longer the duration is between the two...your not trading via a re-entry signal...

    Your trading a completely new trade signal that has nothing to do what occurred in the prior trade.

    For me...if my contingency plan kicks in...I enter often via the same number of contracts as the prior trade.

    However, if that re-entry signal is via price divergence (price action only)...

    I'll add in more contracts on the re-entry.

    Once again...can you provide a chart of what your talking about so that I can see if I'm on the same page in your thinking.

    Last of all, if my original entry was a poor executed trade...

    I do not look for re-entry signals because my re-entry signals are based on the fact that I followed the book on the prior trade and it just didn't work out.

  7. paulus


    hi NahabaAshi,

    thanks for responding to my mail again; did not trade for a while
    (other job) and i am only trying to pick up things by developping
    a system in which re-entry rules are implied; i prefer tight stops
    so i risk to be stopped out without my setup being no more valid;
    what i try to find out are technical criteria which allow to re-enter;

    could you please explain "the key to a good re-entry is your original entry ... the duration between the original entry and
    the re-entry signal";

    btw, i intend to develop a trendfollowing system, whereas your system seems to be based on reversals (divergence) ?


  8. vikana

    vikana Moderator

    I'd say that your stops are too tight. It's easy to assume that tight stops means less risk; in reality stops often need to be larger than expected to make trendfollowing strategies work.

    My longer term strategies do not even use stops; only entry and exit signals. I have found that to work better.
  9. paulus


    how do you mean, having an exitstrategy without stop(s) ?
  10. vikana

    vikana Moderator

    I mean that I do not use e.g. trailing stops or money management stops.

    I generally exit based on entry conditions no longer being true or a particular custom crafted exit criteria.
    #10     May 3, 2004