Registered User
Joined: 10/7/2004
Posts: 2,181
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This quote is from the Worden's Report from last night. It's worth reading if you have not as of yet. Emphases mine.
"Proposition 5. Given Propositions 1-4, trading success is mostly determined by one's strategy for exiting the trade rather than the strategy for entry.
Since one does not know at entry whether a trade will be profitable, one could probably select stocks at random as long as losses are kept at a minimum and profits are maximized. However, systematic entry and exit rules based on technical analysis can improve the likelihood of a profitable trade. For example, most stocks follow the general market's trend, and trading consistent with that trend can enhance one's likelihood of success. Nevertheless, given the considerable uncertainty accompanying all trades, the highest priority must be given to the rules for exiting the trade. If one enters each trade assuming that it will fail, one will be better prepared to handle losses."
I believe in these principles emphatically:
!. Exit strategy is more important than entry
2.Systematic and well thought out entries are important but pale in comparison to the value of the correct exit.
3. Once a stock is selected, force it to persuade you that you did not make a mistake and jettison it promptly if it cannot do so. The cost of getting back out of an incorrect selection or a poorly timed selection that will be correct eventually is only the price of an extra commission.
Just some good reminders.
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Registered User
Joined: 10/7/2004
Posts: 426
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Excellent point tobydad, I concur. It seems new traders ignore this completely and concentrate mostly on entries, but in order to become a winner, ones exit strategy is very important.
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Registered User
Joined: 4/18/2005
Posts: 4,090
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I dissagre.
exits are important.. and a clear rule is needed if a person isn't great at managing a trade buy intuition. But a crap entry methodology can kill. Or an entry methodology that sudenly stops functioning in the current market condition.
Trust me. 54 losses in a row. nothing to manage.. enter.. stopped out with in the week. Long or short 2 months ago..Most saw proffits for about 15 min. Some for a day or so. Others were but the Pyramid killed it on the slide. some were day trades.. some were not.
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Registered User
Joined: 10/7/2004
Posts: 426
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scott, the volatility in the markets is what is killing you. Instead of setting a stop, how about setting a small profit target and maybe you can turn those 54 losses into winners. This is a tuff market to trade in so maybe you need to change your exit strategy.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Scott;
Don't muddy the waters here for newer traders that need to hear this. Did you actually read my post? Did you read anywhere in there that I suggested a good entry is unimportant? Why, look at how much work I have put into my own entry strategy, for instance.
But I tell you this, my portfolio would be double its current size had I understood the importance of proper exits much earlier in my trading career. And that is a conservative estimate. Almost all of my entries have been good ones (or were, at least, clues that a good entry was coming soon). I would exit these trades that turned against me then ignore that stock and would go look for something else.
6 months later, the stock would come to mind and I'd go look it up....43% gains, 76% gains, 11% gains, etc.
Not to mention, I was quoting a person with many, many winning trades in a row.
On the other hand, your quote: "Trust me. 54 losses in a row." I'm not sure that "Trust me" is the best admonition you can offer us.
Sorry, I am irreversible on this position, the exit is one of the most ignored yet highly necessary skill in trading.
By the way, Booker's advice is excellent. Right now, I'm getting some great returns and staying in longer. But when the market is trending down, I use my Against the Grain or Rolling Stone strategy and am content with 1/2 to 1 1/2% in a trade (sometimes I get more but at the first sign of trouble, I'm out of there)
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Registered User
Joined: 4/18/2005
Posts: 4,090
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I read it. I just dont think :
"Proposition 5. Given Propositions 1-4, trading success is mostly determined by one's strategy for exiting the trade rather than the strategy for entry." is necessarily true.
I absoluetly think the exits are important. But it seems liek lately that ahs been allot of buzz around focusing on exits over entries.. i'm not shure I believe it. I Read Tharps book where he discusses the random entry system. I dn't remember what the conditions were but I know it wasn't open a chart and flip a coin. I also know the strategy came in at "38% good trades with is is about average for trend followign methods" (I actually remember the line to quote it...re-read it some where recently). yea for short term trades the first sign of trouble and get out is pretty good.. the only thing is I found for me it created allot of little gain trades and allot of tradign costs, paperwork etc etc. I still do it.. but for a better gain generaly speaking a longer hold is gonna do it unless you get lucky and get a gap right off the bat.
Booker.
Yea .. thanks. I also realized that I started playign allot of counter trend pop sutff which is the lowest probability for my main setup.. (it still catches them but fewer follow through) AND started picking bottoms. Not a great plan. Though some stuff was clearly showing upside momentum. Fast for example stopped me out.. thank God I moved up the stop as my original wider stop would have been hit ... BUT a month later it really poped!. However I had delisted it from my nightly check list becasue the "minimum health criteria" no longer existed .... needed to make room for othe stocks. And as Tobydad said ... looking back later it had a huge gain.
Nearly all my shorts were early by 2-3 days or more. Except one a residential, the day after I entered it Greenspan made coments about the Housing market having allot of rom under it to go down. It rose several points of the next few days.
I took a month off to get rid of the frustration of trading
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 Gold Customer
Joined: 11/11/2006
Posts: 359
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Tobydad: I appreciate the posts you have made since we last talked.
Relative to the issues of exits, entrances, etc: For several years, I made Beer. I made it from the malted grain using a process called Double Decoction. This process is rare for a HomeBrewer to use. In the process if brewing, one finds that it is easy to make good Beer.
It is also easy to make bad Beer.
The difference is, one must pay attention to your cookies and do EVERYTHING right!
In the dialogues about what is more important, critical, etc in Trading, the same thing applies.
The final product will suffer, if something is left out. With almost every strategy presented, there are no GOOD stocks. There are only stocks whose time to be bought has come. The timing of exits and entrances and money management (discipline) are more important than most things, but all are vital.
Rolling Stones:
Since early March, I have created daily watchlists of Rolling Stones. I will share with you. No attempt has been made to trade these. No altering of the lists have been made. Some duplications may have occurred. Here is the raw lists and results, obtained from the Worden Watchlist Tracker.
Date # of Stocks % gain/loss Win Lose
3/8 4 +2.69% 3 1
3/12 5 +2.43% 3 2
3/13 14 +3.72% 7 7
3/18 10 +6.99% 8 2
3/26 11 (-.28%) 7 4
3/27 4 +4.11% 3 1
3/31 2 +2.5% 1 1
4/1 1 (-1.05%) 1 4/2 3 (-.73%) 1 2
4/3 7 (-1.14%) 4 3
4/4 1 +2.34% 1
4/7 1 +4.10% 1
There were 12 days in the list and 63 stocks.
With absolutely no effort doing anything on your part, you would have a 62% success rate, solely from following the list.
Mammon.
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Registered User
Joined: 2/5/2006
Posts: 1,148
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i disagree too. entrys and exit are equally important. i'd probably say entrys are definitly more difficult. exiting just a matter of setting a stop loss below a support level, within your r:r ratio.
maybe now that were in a bear market, exiting is more important if your going long. but its all relative.
but, i suppose wordens prop 5, may be referring to a certain psychology in taking big losses that affects a trader on future trades, and the fact that you have a finite amount of money to trade with, that makes exiting more important.
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Registered User
Joined: 4/18/2005
Posts: 4,090
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QUOTE (mammon) Tobydad: I appreciate the posts you have made since we last talked.
Relative to the issues of exits, entrances, etc: For several years, I made Beer. I made it from the malted grain using a process called Double Decoction. This process is rare for a HomeBrewer to use. In the process if brewing, one finds that it is easy to make good Beer.
It is also easy to make bad Beer.
The difference is, one must pay attention to your cookies and do EVERYTHING right!
In the dialogues about what is more important, critical, etc in Trading, the same thing applies.
The final product will suffer, if something is left out. With almost every strategy presented, there are no GOOD stocks. There are only stocks whose time to be bought has come. The timing of exits and entrances and money management (discipline) are more important than most things, but all are vital.
Rolling Stones:
Since early March, I have created daily watchlists of Rolling Stones. I will share with you. No attempt has been made to trade these. No altering of the lists have been made. Some duplications may have occurred. Here is the raw lists and results, obtained from the Worden Watchlist Tracker.
Date # of Stocks % gain/loss Win Lose
3/8 4 +2.69% 3 1
3/12 5 +2.43% 3 2
3/13 14 +3.72% 7 7
3/18 10 +6.99% 8 2
3/26 11 (-.28%) 7 4
3/27 4 +4.11% 3 1
3/31 2 +2.5% 1 1
4/1 1 (-1.05%) 1 4/2 3 (-.73%) 1 2
4/3 7 (-1.14%) 4 3
4/4 1 +2.34% 1
4/7 1 +4.10% 1
There were 12 days in the list and 63 stocks.
With absolutely no effort doing anything on your part, you would have a 62% success rate, solely from following the list.
Mammon.
Mamon .. What the Worden Watchlist tracker ?
Funny mony.. I'll second that.. that was probably a more articulate and less cantankerous way of expressing what I wanted to.
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Gold Customer
Joined: 11/11/2006
Posts: 359
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Scott: Bring up a watchlist.
At the top of the screen, click on "Reports"
In the drop-down menu, click "Watchlist Tracking"
It will give the progress of the list since inception.
Mammon
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Registered User
Joined: 10/7/2004
Posts: 2,181
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i suspect my purpose in posting this has been misunderstood. A good entry is so important. I have spent years developing a system that gets me what I consider solid entries.
My primary point is that at least as much effort should go into understanding exits as entries.
"...exiting just a matter of setting a stop loss below a support level, within your r:r ratio."
Easy for you to say at this point, funnymony. If I recall correctly, you have been enormously successful. Setting stops may be second nature for you at this point. Newer traders could not set a stop loss below a support level because they haven't learned how to assess where that correct level is.
And when the market changes its behavior right after an entry; what then?
Both your's and Scott's rebuttals have made the point I intended in the first place. I think that because new traders tend to focus so much on entries and ignore exits, it may be worth a little over-emphasis on exits to gain the correct balance.
Sorry this got so mangled. In an effort to bring some insight, I may have made things more confusing. ***SIGH*** Oh well.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Now that I think of it, are there folks out there that would like to discuss exit strategies; either to learn or to share?
Perhaps we should move past the debate of "whether" and talk about "how".
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Registered User
Joined: 2/5/2006
Posts: 1,148
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QUOTE (tobydad) i suspect my purpose in posting this has been misunderstood. A good entry is so important. I have spent years developing a system that gets me what I consider solid entries.
My primary point is that at least as much effort should go into understanding exits as entries.
"...exiting just a matter of setting a stop loss below a support level, within your r:r ratio."
Easy for you to say at this point, funnymony. If I recall correctly, you have been enormously successful. Setting stops may be second nature for you at this point. Newer traders could not set a stop loss below a support level because they haven't learned how to assess where that correct level is.
And when the market changes its behavior right after an entry; what then?
Both your's and Scott's rebuttals have made the point I intended in the first place. I think that because new traders tend to focus so much on entries and ignore exits, it may be worth a little over-emphasis on exits to gain the correct balance.
Sorry this got so mangled. In an effort to bring some insight, I may have made things more confusing. ***SIGH*** Oh well.
i think the main point is most have a finite amount of money and if you don't exit properly, your moneys either tied up or your out of the game.
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Registered User
Joined: 4/18/2005
Posts: 4,090
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I'm up for it...i'd love to discuss exit strategies.
If you were curious, or if you weren't my most recent trade:
CMED Came up on mon of my short scans a few days ago. 4/7 TSV crossed down through it's upper Bolinger band. This tends to lead a bit.. or at leat the last time I seriously took picks from this scan I was quite early to the show BUT some do follow through imediately. In this case I had a probable break of the uptrends back as at the end of Feb it poped out the bottom side of the ascending trend chanel (trend lines). I saw what apeared to be a weak rally on low volume and a timeing where the indexes almost everything seemed to be trying to possibly rollover. Entered a short order for the cross of the low of 4/3 got in the next day. Following day a proffit (finaly !) I dertermined not to get greedy and take it imediately and let something bigger develope. Hopefuly it would provide me with some clean price action for at least 5 days and I can allow it a bit more room to move once I can move my stop to a place of a small proffit. 4/10 I didn't watch it intra day but noticed that it was headed down in the morning with a vengence.. I smiled and shut down the trade interface. Upon updating TC I was suprised to see that it ended with an up close but it's still with in normal parameters. Decided to leave it alone.. original stop @ 4/7 High +.25. Today I broke my rules and checked my stuff intra day.. All my longs were headed down and this was headed up..I looked back at daily charts and moved my stop to $42.85 and was taken out at $42.90.
Proffitable trade but 1) I got nervous that this was showing such strength in the face of the considerable selling and 2) a potential new long side strategy I'm working with had an unusual surge in numbers last night. Last time the numbers were that good in the scan it lead to a 10 day broader upswing that would have had a greater than 65% winning trade ratio over the two days of sample picks for a 3 day hold and more than 1/2 were still proffitble at 10 days later.
So I decided to play it safe and close the short. Dumb ? May re-enter but at the time such an agressive upday while the only other blue item on the interface was DUG and it's an inverse ETF... so it would be blue.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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"I didn't watch it intra day but noticed that it was headed down in the morning with a vengence.. I smiled and shut down the trade interface."
--------------------------------------------------------------------------------------------------
How come before shutting down the trade interface. You didn't adjust
your stop to lock in more profit?
(or did you?)
Obviously I don't know your trading results but it seems you jump
between elements of day trading and a "let it ride" style.
If you want to "let it ride" move the stop and let the stock tell you
when its done.
Thanks
diceman
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Registered User
Joined: 2/5/2006
Posts: 1,148
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there are many different situations, but bottom line for me is just staying within the limits of a 1:2 risk reward ratio. if i'm trading off a daily, i'll usually wait an hour after my stop limit has been hit, and check the intradays for a possible reversal patterns, before selling. i'll also check for where minor support is and move my stop limit just below it. i may also check the intradays for technical sell signals, such as ma or macd cross.
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Registered User
Joined: 2/5/2006
Posts: 1,148
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QUOTE (scottnlena)
I'm up for it...i'd love to discuss exit strategies.
If you were curious, or if you weren't my most recent trade:
CMED Came up on mon of my short scans a few days ago. 4/7 TSV crossed down through it's upper Bolinger band. This tends to lead a bit.. or at leat the last time I seriously took picks from this scan I was quite early to the show BUT some do follow through imediately. In this case I had a probable break of the uptrends back as at the end of Feb it poped out the bottom side of the ascending trend chanel (trend lines). I saw what apeared to be a weak rally on low volume and a timeing where the indexes almost everything seemed to be trying to possibly rollover. Entered a short order for the cross of the low of 4/3 got in the next day. Following day a proffit (finaly !) I dertermined not to get greedy and take it imediately and let something bigger develope. Hopefuly it would provide me with some clean price action for at least 5 days and I can allow it a bit more room to move once I can move my stop to a place of a small proffit. 4/10 I didn't watch it intra day but noticed that it was headed down in the morning with a vengence.. I smiled and shut down the trade interface. Upon updating TC I was suprised to see that it ended with an up close but it's still with in normal parameters. Decided to leave it alone.. original stop @ 4/7 High +.25. Today I broke my rules and checked my stuff intra day.. All my longs were headed down and this was headed up..I looked back at daily charts and moved my stop to $42.85 and was taken out at $42.90.
Proffitable trade but 1) I got nervous that this was showing such strength in the face of the considerable selling and 2) a potential new long side strategy I'm working with had an unusual surge in numbers last night. Last time the numbers were that good in the scan it lead to a 10 day broader upswing that would have had a greater than 65% winning trade ratio over the two days of sample picks for a 3 day hold and more than 1/2 were still proffitble at 10 days later.
So I decided to play it safe and close the short. Dumb ? May re-enter but at the time such an agressive upday while the only other blue item on the interface was DUG and it's an inverse ETF... so it would be blue.
not sure i completely understand your strategy but, why not set a short term target and a longer term target. set your short term target at where your 1:2 reward ratio is met or the nearest resistance level. once that is met sell half your shares, then the worst you can do is break even. then sell the remaining half when you get a big sell signal like a macd midline cross or a 10x40 ma crossover.
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Registered User
Joined: 4/18/2005
Posts: 4,090
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QUOTE (diceman)
"I didn't watch it intra day but noticed that it was headed down in the morning with a vengence.. I smiled and shut down the trade interface."
--------------------------------------------------------------------------------------------------
How come before shutting down the trade interface. You didn't adjust
your stop to lock in more profit?
(or did you?)
Obviously I don't know your trading results but it seems you jump
between elements of day trading and a "let it ride" style.
If you want to "let it ride" move the stop and let the stock tell you
when its done.
Thanks
diceman
in this rare occurance I got to sleep with a proffit. I no longer day trade... I gave it a brief foray for a few months and actually I considered it momentum trading where I shoot for a 2-3 day hold or longer (trailing stops) and exit at the first sign of weakness. BUT theygeneraly wind up being tiny gains, allot of trading costs etc etc. After moving to Iowa.. the first 8 months or so I had my usual performance.. then took a dip.. the biggest I had ever taken. Since I had the time ,I jumped into "The market" reading anything I could get my hands on, almost everything here, I also began to actively watch my positions during the day... particularily in the winter and on windy days (they suck for flyfishing) At the end I can say that I don't really have a grasp or ability to day trade terribly effectively so I'm stopping that, pluss I can't with the baby anyway. I'm back to swing trading now and if we get some better signs of a bottom in i'll start searching for some longer period holds with looser stops. For now "Let it ride means for me 3-10 days. However it's not gotten that far in a while.
I had intended to let it get far enough away from current price and maybee form a new support area to move the stop to, but at least get far enough away that i can lock in "Some proffit" and let it develop with however moving it up closer would have only gotten me stopped out with a $200 gain (100 shares) as the stop would have been so tight there was no room for wiggle. I did intend to trail the stop... but not that close.
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Registered User
Joined: 4/18/2005
Posts: 4,090
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Funnymony:
I'm with you on the 2:1 thing. I in the past have moved my stop behind price as it goes in 1 of 2 ways. 1) trail it tight under the daily lows (under intra day support, fond after hours, in really large range days) or lately i've been considering the AVGL5 plotted on price scale, just a tad wider and reading candle signals on the way for sell signals like Dark clouds. Thing is, often my entry candle turns out to be an exit signal, Or I get an exit candle the next day or a minor gap down etc etc, or a large range whipsaw... now i'm whining. so at the first chance to REALISTICALY move my stop to a point of breakeaven or small proffit i'll move it and let price move on. hasn't worked outlike that in a while.
2) in some stocks i'll wait till support is finished and price is moving further up to move up my stop. Haven't used this in a while as nothing has matured enough to allow it.. or I get whipsawed out and find the stock later sitting on my original target. But that's been a while. I'm considering switching that to a breech of the MINL10 or some value as often a candle sell signal is followed by more good trend . Just reading the candles from day to day can be emotional and subjective... but the Breech of the MINL 10 will force you to stay in a trade as long as it is trending.. unless it's a choppy or wide roller. Nothing is perfect.
The strategy i'm testing now was intended to be more of an "income" type of strategy but it's turning out so far to be a bit more of a better swing strategy.. it was intended to have stops trailed daily and use candles to exit (moving a stop up to the closing price) But the last buying cycle seems to have a better window of 10-11 days. Could be anomolous so i'm still watching it and backtesting it to the best of my ability. In that case i'm making picks that are already near thier MINL10 so I can just use it as the stop BUT I think ONLY after a certain landmark is made. Not shure what yet. BUT that would definately keep me in for the average 10 days in most cases.
I'm not using that strategy live yet so what i do now is what i've alwayse done.. use my interpretation of candles and charts to make entries on and do my best to manage the trade well based on the same.
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