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Under what conditions do you exit a trade before your target or stop has been hit?
Hmm...I feel perhaps the question could use more context for different scenarios, or perhaps more importantly the type of data your are collecting requires different scenario categories in order for the data to be useful.
For example: A) Was the trade designed to be trend following vs. counter trend? B) Was the trade designed to be a simple day trade from one end of the range to the other or designed to be a swing trade over multiple days or weeks? C) How much size is being managed?
In scenario A for example, if I took a counter trend trade, I would likely be inclined to close out a trade much earlier in a discretionary decision than if the trade were following the trend. For example, lets say I decided to fade the 6E today when price was at 1.1180. Even if I was only up by 5 ticks, if something with price action didn't feel right, I would have no problems cutting the trade. But if was trading with the trend short and I was already up 180 ticks for the day, and I"m targeting 1.10, I would process that information very differently since the rest of the trend traders have my back.
Lacking any context, I would suggest a criteria you have not mentioned is to identify whether the activity going against your position is initiated or responsive activity. I remember a former trader at Citi telling me about a time when they bought $10M in a currency pair and price didn't move at all. Then they threw another $100M, and then another $100M, but price STILL barely moved. Surmising they had run into a central bank on the other side of the trade possibly intervening in the currency, they decided it was time to bail.
Can you help answer these questions from other members on NexusFi?
Whenever I think about deviating from my original plan & rules I ask myself: Can I repeat the action or backtest it? If I were to allow myself to act on impulse, I would start doing it all of the time and loose the self-discipline I constantly strive for
That being said there are times when a trade is going horribly wrong and you need to just get out, but these situations should be the exception and not the rule.
When I do quick mean reversion scalping with CL I tend to look for at least a 1:1 expectancy or better before I take notice of how I'll exit. It really all depends on how fast price has retracted back in my direction and/or if it's giving any signs that it will continue. With oil for instance the sign that I'm looking for specifically is if price runs in my direction without stopping so it's best to just see if it keeps going until it stalls. Sometimes oil will jut in a singular direction 10 to 20 or more ticks without retracing a single tick and that is where I let the trade run to a higher expectancy than 1:1. If and when it stalls I analyze if price is at a key support and resistance level or some other area for a cue that price will bounce back against me.
The scalping mean reversion style of trading is a lot different than my swing/day trades and is much more fast-pace requiring a different skill set. The same concept can be used for longer duration trades if the trade is being watched continuously through. Since one is not looking at the entire behavior of a trade that takes a few hours it's much harder to gauge whether or not price is stalling as opposed to being in a trade that's just a few minutes long. There is also the possibility to identify if price has stalled within a single candlestick by simultaneously looking at a smaller timeframe to see what price has done but this can become a hassle after a while. The other important similarity between these methods is when the day or swing trade has reached a key area of support and resistance determined by price structure.
R.I.P. Joseph Bach (Itchymoku), 1987-2018.
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Trading: The one I'm creating in the present....Index Futures mini/micro, ZF
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I must say I am in total agreement with this simple, on the one hand yet complicated on the other, answer.
The business decision must be allowed to play itself out. Following your Trade Plan. (must be set up ahead of time)
But, we are organic beings. And a traders Trade Plan should grow, change and evolve in an organic way IMHO as the trader's understanding, ability, mastery and to me the most important aspect their spiritual maturity develops.
So what am I talking about??? Spiritual Maturity..... What is it????... Are you developing your Spiritual limbs and organs? (Huh??? whats this guy talking about...lol)
Are you acquiring virtues? Virtues that will IMHO take your business further than the newest latest and greatest indicator......
