Entries and Exits for Pullbacks/Retracements in Trends?
For those of you who like trading pullbacks in trends, what entries and exit strategies have you found that work the best? Do you target the last swing high or low, or hold on for a bigger move? Do you wait for confirmation of a resumption of the trend, or fade the move as price pulls back? Multiple contract strategies? Where do you like to place your stops and targets? Thanks!
When I started with one contract I was just trying to get the first pop, once I saw the first 3 candles turn with higher highs going up or lower lows going down plus a little pop in volume at the turn candle, looking for the swing to get taken out and moving my stop right to B/E as soon as the pop happened, and then trailing a couple of ticks from the lows going up and highs going down, once I saw a second pop I would immediately close the trade. That has some risk because now you have some space.. if the swing doesn't get taken out you don't have much space to let price breath, but with 1 contract you have to keep it super tight. Once I started adding contracts I got closer and closer to that turn candle by watching that pop in volume (it has the least risk in my opinion cause if they turn it would be right there) I try now to divide my entries in 2 or 3 at that low, once I see the pop I go for one and have one behind it if they go against me a couple of ticks, and one above it if they just take off. The entry with the closer price to the turn has the most reward so I leave that if it becomes a runner. The other two I get out very quickly after the first pop to reduce basis for that 'runner' in case they turn before the previous swing against me. And to keep it very simple, if you have 2 candles that just go against you right after you got in.. get out for a little loss, don't wait for a turn if price is not going in your trade direction... and... If another pop in vol comes after that, I reverse.. very likely they go the other way very hard.
Once I started trading with volume profile it got much easier. I recomend you look into that.
Hope it helps!
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Entries: breakouts of Ross hooks in the direction of the trend, and breakouts of the mother bar (following mother bar/inside bar(s) set-ups) in the direction of the trend. Two very closely related techniques, really.
Exits: targets determined by perceptions of support/resistance, volatility, and manually-trailed stop-losses beyond recent swings high/low.
I want a trade to look like it can move in my direction for at least the same distance as its initial stop-loss (not sure if that's what you mean by "target the swing high or low"?), and to be able to hold on with the third of my three lots/contracts in case there's a bigger move.
Yes, more or less. I don't fade the move as the price pulls back (too nervous that it might be a reversal, rather than just a retracement, to do that) but I don't always wait for the previous high/low to be taken out before entering. I decide this (in accordance with Joe Ross techniques) according to whether it looks reasonable to use one of the variants of the "trader's trick" entry methods.
Yes, always. I really dislike trading fewer than 3 lots/contracts: I don't feel comfortable at all without being able to scale in and out of positions.
Stops just beyond swings high/low and targets variable.
I like to close two lots/contracts together, with the aim of locking in profit before letting the third one run, if it's going to.
(Slghtly surprised to see so few responses to your post.)
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I trade pull backs in a trend but where you buy I just don't think is important. What matters is the trend continuing. Of course I would rather buy lower than higher so I in general I am trying to buy when there is the most fear and things seem the most uncertain. Since we know volatility spikes tend to cluster you should have some method to scale in and get more than one chance at a good price.
Trying to figure out precise magic numbers for all this though is pure nonsense IMO. Just because your magic number is profitable does not mean it is better than any other random magic number that would also be profitable if the trend continues.
Taking some profit near the old high if things work out is never a terrible idea. Scaling out by 30% vs 40% or whatever though doesn't matter. I do like doing things in 1/3rds but I think it is rather arbitrary.
Stop levels are the easy part. Trade a portfolio of bets so any single position can go to $0 and don't waste your time with useless stops.
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