I look for a 4% gain, a 10% stop, or out after 5 days if neither of those are hit. When price hits a 4% gain, I hold until the close of the day, as a strong move will very often continue until the close. This is a very difficult thing to do from a psychological standpoint, but over time patience is well rewarded. I don't take partial profits on the way to my target. For my system, I feel it's a copout and demonstrates a lack of confidence.
your losses are 2 1/2 times your winners??? How does that hold up over time? Seems to me that it would be hard to overcome a risk vs reward set up like that.. Thanks -Matt-
Brandon... although your post was informative.. its something thats basic and very general. I am trying to focus this thread on specific types of exit strategies.. that traders use.... not general one's. Your post is more of something like a beginners guide to exit... In my opinion.. the more discretionary the exit becomes.. and the more micro management involved.. the worse you will be off... My biggest problem is that I always need something to do... to feel as if I am making money so I tend to scale out for profits.... which in the backtesting world.. is usually the wrong thing to do when trying to accumulate net profit.. My goal in trading at this point.. is to develop an exit that is sound and extremely simple... I really am gravitating towards just using a simple volatility trailing stop such as ATR.. --MIKE
A very small percentage of my trades ever hit the full stop. My system requires a wide stop in order that trades can have room to move, as I buy stocks that are completing a severe correction. Moving the stop tighter in my case just takes me out of many trades that would have gone on to profit nicely. If I was trading momentum or breakouts a stop like that would be dangerous. But that's not what I trade.
anybody mention trailing stops yet ? I think they are great. I use discretionary entry and mechanical exit.
This is the method I use. I look for intraday pivots and trail exit stops beneath them. 15 minute bar charts can work well for this. I move the stop up (long) under each pivot after it is formed and historical. Historical meaning prices have moved away to new short term highs already. This will usually keep you in a trade for a nice portion of the swing. Banker
Banker... I like the idea of going intraday to trail a stop.. assuming you are swing trading the daily bars. I am looking to trail a stop under swing lows on a 60 min chart.... I think 15 min chart might involve too much noise.
Trend Fader, You can use whatever time period chart you want. When I first started doing this I did it with 3 minute charts. That was too short for me. 60 minute charts will work well for some trades. I like 15 minute or 30 minute time period charts mostly. It's a good idea to look at whatever you are interested in trading, and pick a time period that seems best suited to the particular instrument of choice. Trailing on intraday is my favorite style of trading. I also close positions if I feel things have gone "too far, too fast" in my favor. I have a hard time defining what that means though. Banker