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Under what conditions do you exit a trade before your target or stop has been hit?
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Under what conditions do you exit a trade before your target or stop has been hit?

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Under what conditions do you exit a trade before your target or stop has been hit?

I was thinking about this lately after looking at my mfe and mae. I've been implementing targets in my trading because I've realized most of my trades out preformed my discretionary scale-outs but this leads me to another question. At what point do you think it's worth pulling the plug on trades that haven't reached their target or stoploss that would benefit you more? I've heard all sorts of reasons from price exhaustion to incoming news. I was curious what other traders think and what has worked best you?

Before I thought if price came 50-70% to my target and then back to my entry I should get out but It's a lot less effort to just trade smaller and turn off the software and wait for either the stop or target to get hit. I have the hypothesis that not intervening will balance out over a large sample size. The method of walking away and letting what happens happens is more my style because it requires no intervention of exiting prematurely.

I was curious if anyone has done analysis on their own trading with both cases and which has outperformed: 1. exiting with discretion based on market conditions or 2. completely not interfering and letting the trade run it's course.

Thanks,
Itchy


Last edited by Itchymoku; February 19th, 2015 at 10:26 AM.
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ichy, my humble experience...? sometimes I had ur same problem till I ve found out a method for me.
I think it depends from ur method.
There are people who uses supp/res-fibs-pivots-camarilla as targets
There are people who used fixed targets (ex +10,+20 and trail)
I think one of the most difficult things in trading is not the entry but more the exit. U exit early, bang, the trade continues going in that direction as crazy. U exit late, a bad loss maybe u'd need to do 1-3 trades to get back on track.
For me best stop is to have a good win ratio and risk reward return.
I generally trade for 8tick (first target). i use 4ntrenko so it s like 4 bars, stop 10 ticks and the second half I trail.
But as I said, it depends from ur system.

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When the hopium has run out...

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When the hopium has run out...

I assume hopium is synonymous with price exhaustion?

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Iím a set it and forget it type of trader. I swing trade equities and donít need to watch the screen all day. Once Iím in a trade I can manage the exits on a daily basis once the market is closed.

Once a stock has moved in my favour I move my stops giving me less risk in the trade.

I look for a risk / reward of around 1 to 3.

Once a stock has move in my favour I like to keep the same ratio.

So if Iím risking $1000 to make $3000 and the trade moves $1000 in my favour Iím now risking $2000 to make $2000. Iíll move my stop to break even or above so that Iím risking less than $1000 to make $2000.

At this point Iím in what I consider to be a risk free trade as I wonít lose any of my original capital if my stop gets hit.

Depending on the price action I may trail a stop.

In all cases I take the trade off at the target price.

It is hard to find the Truth when you start your search with a preconceived notion of what the Truth will be.
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Itchymoku View Post
I was thinking about this lately after looking at my mfe and mae. I've been implementing targets in my trading because I've realized most of my trades out preformed my discretionary scale-outs but this leads me to another question. At what point do you think it's worth pulling the plug on trades that haven't reached their target or stoploss that would benefit you more? I've heard all sorts of reasons from price exhaustion to incoming news. I was curious what other traders think and what has worked best you?

Before I thought if price came 50-70% to my target and then back to my entry I should get out but It's a lot less effort to just trade smaller and turn off the software and wait for either the stop or target to get hit. I have the hypothesis that not intervening will balance out over a large sample size. The method of walking away and letting what happens happens is more my style because it requires no intervention of exiting prematurely.

I was curious if anyone has done analysis on their own trading with both cases and which has outperformed: 1. exiting with discretion based on market conditions or 2. completely not interfering and letting the trade run it's course.

Thanks,
Itchy

Personally, I don't think it matters whether you are long or short... day trader or long term... and certainly in equities but I imagine it applies to other forms of trading.

You would cut short an existing trade that is not meeting expectations when you have found a better opportunity to invest the said money.

That is my approach

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Itchymoku View Post
I assume hopium is synonymous with price exhaustion?

If by price exhaustion you mean trader exhaustion then yes.

To be honest I try to hold to target or stop, but recently haven't been able to. Too often I spook myself out of good trades or hold onto losers out of spite because I dropped a good trade. Gotta kick that habit quick.

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I was curious if anyone has done analysis on their own trading with both cases and which has outperformed: 1. exiting with discretion based on market conditions or 2. completely not interfering and letting the trade run it's course.

Thanks,
Itchy

I haven't done such analysis but I find it is more important for me to keep things less stressful rather than get most $. Trading per plan, sticking by the rules makes that possible and makes life at work and home better for me and the people around me.

Also, I have found that a trading plan cannot be fixed. It has to change as I risk more and I constantly work on making my rules suit my psychological makeup rather than making more money. I also find that having rules for different scenarios helps. For instance, if I have had a really good start to the day, I will take more risk, stay in trades longer because it is easier for me to do so and so I made it a rule. If I have taken a hit early, getting back to breakeven becomes my first goal and then depending upon time left in the session there are further rules.

Discretion really does not work for me. I have to be able to explain my decisions in hindsight. If I cannot, then I cannot consistently make the same decisions day after day.

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(this isn't based on testing)

If you are trading for larger swings then I think taking 2/3rds off at 2/3 of the way to the target works out best.
Also once the trade is in the money equal to the stop-loss amount then moving the stop to the entry price.

If you were trading 3 contracts for a 12pt swing with a 5 point stop, then 2 contracts are closed at 8pts in the money and an alert is set for close to 12 (e.g) 10.5pts in. At 12 points you would still let the 1 remaining contract run if you felt the move had not finished.

At 5 points in the money the stop is moved to the entry price.

---------
A lot depends on how you determined the target and how you determine a failed trade.

If you have a time limit for failure and the trade has not progressed far enough for your time/price expectations then you would close.

Sometimes you just get a feeling - this is going to turn - and you need to close.

Keep your mind in the future, in the now.
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