Let's talk 'Exit Strategies'; your methods to help cure my madness
|September 14th, 2011, 07:51 AM||#11 (permalink)|
Futures Experience: Intermediate
Favorite Futures: 6E
Posts: 247 since Dec 2010
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Trademanagement and exits
This weekend I was revising a strategie, and also looked at different exit strategies.
The strategie is simply based on catching pullbacks in trends, or breakout-pullbacks.It should go without saying these setups work better in trending markets, and give fewer entries or more stopouts on sideways dyas. The “ rules” are based on observation and in applying concepts instead of hard rules, this is why setups do look different everytime but have the same characteristics. I trade naked chart, no indicators.Besides how the setup “ must look like” , I take other elements into account, e.g. market structure, higher timeframe structure and trend, how old is the trend , is trend nearing resistance or weakening etc.
The results are collected by scrolling the charts bar by bar, and decide everytime at the right end of the chart to enter a trade based on a a certain set of guidelines (rules). This to try to create results as close as realtime. ( offcourse exact results will not be achieved trading realtime ).
All results are based on trading 1 6E future ( eurodollar).
For information, In chart 1 you can see the different exit strategies. M1, M2, M3, and M4
In short: ( example long entry)
M1: after entry, if trade shows hesitation, exit before hard stoploss is hit. Next, trail the lows of subsequent candlesticks until taken out.
M2: always exit at T1 ( see chart) no matter what. No premature exit, just wait till either T1 or stoploss is hit.
M3:try to catch “ big wave” by trailing higher low” waves” on chart ( see chart 1). No premature exit, just wait till either a wave “ break” or stopploss is hit
M4:try to catch “ big wave” by trailing higher low” waves” on chart ( see chart 1). No premature exit, just wait till either a wave “ break” or stopploss is hit. Except that after T1 is hit by price, I move my stopploss to -2 points from entry
In chart 2 you can see the different result when the different exit strategies are deploid over the trades in the last 6 months. So entries are always the same, it is just the exits which differ.
Since the trades depend on market structure and market environment, it is not possible( for me although) to let a computer program run these tests and I have to use a simple pen, paper and excel to collect results.
What I want show here are the very different results. What was astonishing ( for me) were the very different profits/losses.( offcourse now I think offcourse this produces different results, but I just did not expected resutls would be this different) My own method(M1), which I thought was good, based on some screentime, produced the worst results. Again an example how your brains can fool you. If I do not touch my stoploss and just wait results are better. Far better results are achieved when I try to catch “ the runners” , exit-method M3 and M4. The difference between M3 and M4 is just that after target T1 is hit, I move stoploss to entry minus 2 pips ( this because some runners run back to entry and take off again ). Exit method 3 just takes the stop out. So letting a contract “ run “ shows far better results. And requires more dicipline.( offcourse everything is just based on this batch of trades).
I wanted to show this to some traders ( who haven’t yet thought about it that exits can have bigger impact than entries, so this is also something what is really important to investigate within your method ( if you haven’t done yet ).
And I also wanted to ask to the experienced traders. Do you see flaws in this “ test” ? Do I make some mistakes ? ( almost certain, but I may not be beware of these mistakes).Can you tell me how to test things better? Do you think 6 months is sufficient? Do you have better ideas? What are your experiences with exits, and trademanagement?
Last edited by Zwaen; September 14th, 2011 at 08:29 AM.