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John,
Interesting topic. Recognize your thoughts.
The funny thing IMHO is the fact that we all are so much focusing on
entries. This can be proven by the fact that the softwaremakers give us this
software with over a 100 indicators and most are to be used as entries. How
many exit indicators do we count in Metastock ?
And why on earth do the stops in MS 6.5's systemtester all analyse equity
except for one that analyses price ? The answer: That's the client's wish.
Sounds/feels/smells like a good piece of marketing.
Funny, because I believe that the exit is far more important than the entry.
I believe that you could take your entry on a toss of a coin and still be
profitable using a superior exit-strategy.
Would be bad for TA software-sales unless we are prepared to pay a lot for a
program that automates our coin-tosses.
Anyway that's my personal opinion which I think is as good as anybody's.
I like your questions.
May I add some:
Isn't exit-strategy a part of total moneymanagement ?
Should we not include trading-size ?
Are we scaling in and out ?
And if we finally come up with a solution, can we execute it ?
With my EOD-trading on the AEX index futures here in Amsterdam I'm always
scaling in and out of my positions, so scaling out is part of my
exit-strategy. For example I take 25% of the table at any 38% retracement
of the current swing and at any penetration of the 3day MA of the H/L. (Is
this a kind of trailing stop ?)
When it goes against me after entry (which happens a lot) I do the same,
scaling out whereby I depend a lot on my "fighting-the-tape-feeling". As
soon as I recognize it (observe myself more than the market) I start pulling
out of my positions and don't even wait for my "official" stops mentally
placed at so called fractal High/Lows and on those same 3day MA's.
As long as hope and a few other emotions don't show up it is workable,
especially if I don't look back too much. But there must be ways of improving.
Looking forward to read more,
Frans
PS: What's the difference between a trader and an investor and how do you
transit from one to the other ?? <G>
At 08:29 1-09-98 -0400, you wrote:
>After reading several posts recently by some new and old participants in
>the list I would like to start a discussion of my favorite subject,
>namely loosing money. It seems there is a lot of confusion about when to
>get out of a stock or commodity. Most of that confusion is between my
>ears.
>
>First when you purchase a stock or commodity when do you pull out if the
>position moves against you? Second, how much do you let your position
>fall thinking that it's just a retracement a will continue the move?
>Could someone explain how to use stops properly? Especially trailing
>stops. Do I need em? I am getting mad watching my profits evaporate and
>go into losses.
>
>Last week I went flat in my portfolio. I sold all my stocks and kept all
>my option straddles. Then I fretted all week that I had missed the
>bottom and would miss the next up move. That's when I realized I have
>too much emotion involved in my decisions. I have always said I don't
>have a good exit strategy but I didn't realize just how much my emotions
>were playing into it. Now I question my entry strategy too, and that's
>pretty much mechanical. The subjective part is whether or not to
>actually put the trade on.
>
>Everyone tells me about fear and greed dominating trading decisions. I
>also think I have listened too long about my time frame and goals. I
>have been investing for ten years and trading for maybe five. Over that
>time people have told me to invest for the long run, let my profits
>ride, don't be swayed by short term blips, decide what time frame I want
>to trade and all the other admonitions about trading. This has served to
>confuse me more than help me as I made the transition from investor to
>trader.
>
>So I admit it, I sometimes lose money because of my exit strategies. A
>lot more than I would like to admit. So what are some of your thoughts
>on exiting a position. I really hope I get a lot of feedback on this
>because this is really important to me, and it seems to a lot of other
>people too.
>
>John Manasco
>
>
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