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Exit Strategies

Posted 10-18-2009 at 11:00 AM by Tekmnd [Show Appreciation] What's This?

It is often said that how one exits the market is much more important than how one enters the market. I thought I would re-post this 4 video series from Lanc Beggs on exit strategies.





Cheers
Tek

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  1. Old Comment
    Ruben..'s Avatar
    This is great, Thanks Tek
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    Posted 10-18-2009 at 05:06 PM by Ruben.. Ruben.. is offline [Show Appreciation] What's This?
  2. Old Comment
    Great stuff. Thanks for posting. Lance Beggs is truly one of the best.
    Take care
    JBN
    permalink
    Posted 10-18-2009 at 09:34 PM by jackbenimble jackbenimble is offline [Show Appreciation] What's This?
  3. Old Comment
    Simit Patel's Avatar
    on my to do list is the next update for informedtrades university -- when that comes around i think we should add a bunch of posts you've made like this one that are very educational.
    permalink
    Posted 10-19-2009 at 06:47 AM by Simit Patel Simit Patel is offline [Show Appreciation] What's This?
  4. Old Comment
    forexer's Avatar
    Hi,

    For ranging markets, i would have a predetermined limit stop order. Because if i'm right, i'm right and price should not exit my limit by much. My stop can be very tight because in ranges, when i'm wrong, i know very quickly.


    In trending markets, my exit would be a trailing stop order. I talked about how trends can last longer and longer because loosers add fuel to the fire and price takes the path of least resistance. So, a trailing stop would be the best barometer for an exit profit. The stop should trail behind by a little more then the average daily range to decrese the chances of getting whipsawed. this method is logical to me because when price goes against you in a profitable trade for more then the average daily range, there might be signs that the trend might pause or stall. then out i go.


    the only hard part is when to pace the trailing stop. If i place the stop to breakeven too soon, i might have a high chance that i get stopped out although i was still right for the move. this takes experience and skill. Dicipline is very important.


    Forexer
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    Posted 10-19-2009 at 07:43 AM by forexer forexer is offline [Show Appreciation] What's This?
  5. Old Comment
    hi community,

    Im going through the second video and im lost on belief #7. it starts at 6:39. i understand that setting tighter stops will decrease your winning percentage because you get stopped out more at a smaller loss, and that setting wider stops increases your winning percentage, but when your stop does get hit you will have suffered a larger loss.

    Im lost on certain parts which are:

    1). "When we use stop management in an attempt to increase our winning percentage it often comes at the cost of a smaller average win/loss ratio through either smaller average wins or larger average losses."

    this to me sounds like while your winning percentage would be higher, the smaller average of wins to losses would almost make this not as good of a stop system then the 2nd one which uses tighter stops, has a lower winning percentage due to those tight stops being hit more, but the wins would be greater then the losses? Is that the reason the average win/loss ratio would increase if your winning percentage is low due to tighter stops that are being hit?

    2.) At the end of belief #7 did he switch the 2 styles around from the order they were explained before?

    i can see the effectiveness of both strategies but it seems to me that the 2nd one with tighter stops would make more sense, but this could only be because of my limited understanding of belief 7.


    i would greatly appreciate it if someone took the time to help clear that up for me.

    Thank you
    permalink
    Posted 01-23-2015 at 05:33 AM by marcussl55 marcussl55 is offline [Show Appreciation] What's This?
  6. Old Comment
    Tekmnd's Avatar
    Hey there

    What he is basically saying is this-

    If you go with a wider stop, your stop will get hit less often. So therefore, your win to loss ratio will improve.
    However, when your stop does get hit, you will lose more money than you would if you used a tighter stop.

    --
    Then he says the reverse-
    If you go with a tighter stop, you will get stopped out more often, but you will lose less each time you do get stopped out.
    ---

    The point he is trying to make is that finding the right stop location is really important. Much more important than where you enter.

    Furthermore, successful trades are not just buy/sell so much as they are a relationship between where you enter, where and how you exit when you lose, where and how you exit when you win, how much you risk, and how you manage the trade.

    You should put more effort into figuring out how and where to place your stops, than how and where you enter the trade.

    Cheers
    Tek
    permalink
    Posted 01-26-2015 at 08:37 PM by Tekmnd Tekmnd is offline [Show Appreciation] What's This?
  7. Old Comment
    Tekmnd's Avatar
    " but it seems to me that the 2nd one with tighter stops would make more sense"

    In one example, you will get stopped out more often, but lose less each time it happens.

    In the other example, you will get stopped out less, but lose more each time it happens.

    Your goal is finding the best spot such that when you add all trades together, the amount you win on the winning trades is more than the amount you lose on the losing trades.

    Cheers
    Tek
    permalink
    Posted 01-26-2015 at 08:40 PM by Tekmnd Tekmnd is offline [Show Appreciation] What's This?
  8. Old Comment

    thank you

    i appreciate it, that cleared it up for me.
    permalink
    Posted 01-31-2015 at 06:14 AM by marcussl55 marcussl55 is offline [Show Appreciation] What's This?
  9. Old Comment
    one last question.

    at the end of belief #7 (7:31) he says you have to decide whether you prefer,

    1.) "a smaller percentage of winning trades but bigger profits when you do win." which i believe i understand but any input is still welcome.

    or

    2.) " a larger percentage of winning trades being happier with smaller profits each time". this is where im lost, why would the profits be smaller if you were to chose to set wider stops?

    thank you again
    permalink
    Posted 01-31-2015 at 06:40 AM by marcussl55 marcussl55 is offline [Show Appreciation] What's This?
 

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