Trader Q&A

“Plans That Pay” Part 4 the Exit

Trading Situation:

Dave has been trading for 4-5 years now & is still learning his strategies and fine tuning his trades. His profits don’t seem to be increasing and he is only winning slightly more than he is losing. Basically he is stagnant.

Trader Background: 

My situation is that I have what seems to be a good strategy. I win and lose, up and down and I can’t seem to get better. My trading is stagnant and not improving nor is my profitability. What can I do?

Coaching Feedback: 

In Part one, we discussed the importance of the trading plan and its completeness and we covered in detail the first of four areas related to the trade. In part 2 we covered the entry and various thing that can be done to fine tune and increase profitability.

Components of the trade:

1) Pre-entry or set-up criteria, the conditions that exist before you enter the trade

·        Market trend and conditions

·        Different time frames

·        Specific indicators

·        Trend affects on the trade

2) The Entry – where’s the best, most profitable place to enter

·        Strategy criteria – define as detailed as possible

·        Refining the entry with smaller timeframes

·        Placing the trade and order entry with precise targets of stop loss and profits

·        Tracking while in the trade

3) This week we will be detailing #3 “The Trade”

·         Monitor and maintain an “emotion - LESS” mindset

·        Are all the set-up criteria being met

·        Determine the market conditions

·        Do they coincide with how you want to trade to go?

·        Be ready for any changes to the conditions

·        Be sure your using hard stops  

·        If conditions change from a “perfect” trade modify the trade for the best results possible 

·        Continually ask the question: ”What’s really happening?

Part 4  “The Exit”

Exiting

Exiting a trade may seem to be an easy thing to accomplish; after all, all the hard work is over.  The set-up was met the entry has passed, all the conditions are remaining steady WRONG.  Now is the most important time in the trade, locking in the profits. 

This is also an area that fears can pop up based on previous losses.  Fear will stimulate the desire to exit earlier than necessary.  Traders can overcome this desire by creating more certainty in the moment and also keeping their mind occupation with questions. 

Some questions might be:

Are my indicators still in place?

How are the other markets doing? 

Is the trend going the way I want to?

Use any that will allow you to determine the present situation correctly.

Next be sure to set your profit target in place and feel free to move you stop up accordingly.  Not to close that it stops you out fast and to far so you don’t run the risk of giving it back.

Locking in cash

When locking in cash reaching your goal is great and here is where you want to watch out for the “greed factor”. If you are up good money and it’s all worked as planned and all in all it’s a great trade “Lock it in”. Also keep an eye on your indicators to be sure things are not changing in the opposite direction.  What goes up WILL surely go down at some point. 

Managing Stops

Most traders place hard stops and let them get hit on a regular basis.  Through observing high-end traders I have found they look at stops a bit differently.  They place stops just in case the market runs to fast and they can’t get out of a trade on their own the hard stop protects them.

They also determine if the trade is working or not working and make their decisions quickly. If it’s not working they do not hold on and wait for the stop to be hit they exit before and work to minimize the lose. 

They have no delusions about the trade and if it’s not working they lock in what they can and go on to the next trade. There is no H-W-P mode or the hope - wish – pray mode that takes place, just the realty of the trade and a lesson for all traders.  The market is what it is and all we can do it take what we can when we can.

Adapting to the Market Situation

Another thing to notice, is the speed of the market and volatility. Remember order flow generates the speed of the price action. Volume = Volatility = Motion.

So if things start to slow down going into caution and preservation mode is a wise thing.  Lock in as much profit as possible given the situation.   

Lets review:

·        Logical Exits

·        Lock in cash

·        Manage the stop

·        Adapt to the market situation and be “realistic”

 In the meantime Great Trading!