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Hi nikku,
Wednesday, December 8, 2004, 12:14:40 PM, you wrote:
n> Thanks for the clarifications. I will be examining different exit
n> strategies after reading your posts. I assume that when you
n> mention being taken out of a trade by a signal, you mean maybe a
n> signal from the system that got you in or maybe a signal from
n> another short-only system (I hope this distinction makes sense -
n> the whole reason I am looking at these stops is that I have
n> systems that are not designed to be always in - that is, they are
n> designed to trigger trades in one direction only). While typing
n> this, I just realized that I have not examined the concept of a
n> signal that says "Close your longs but that doesn't necessarily
n> mean go short". I have seen reference to these kinds of signals
n> and maybe they are a bigger part of winning systems than I have
n> realized.
When you enter a trade, you do so because you think the reward to
risk ratio is in your favor: the entry seems to work more often than
it fails, and when it works the profit is greater than the losses
when it fails.
As a trade begins to move in your favor, this reward to risk ratio
begins to shift. At some point, the balance is just about equal, and
at another point, the ratio goes negative. I wouldn't want to stay
in a trade where the ratio was negative.
Quantifying all this however . . . whoa boy. What's the time frame,
etc., etc., etc? It's very difficult to do. I just don't like to
use % of profit as an exit. I will readily admit however, that if
you can develop a system using it, where your winners outweigh your
losers, you should in fact do so. My way of trading works for me, in
this market, and may not work for you, in yours.
Yuki
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