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In a message dated 9/2/98 6:25:19 AM, cpbow@xxxxxxxxxxxxx wrote:
<< As well as any specific suggestions you may have, i'm interested in
what more general approach i need to take:
>>
I've found that a two step exit approach works best for trendfollowing
systems. You need fairly wide stops in the beginning so that you don'y get
whipsawed and so you can let the small profits become large profits. Once you
have a large profit you then tighten up your stops but do not exit unless
required. Big profits can become even bigger . Now to be more specific I
would define a large profit as being five ATRS or more. Once that level is
reached you should lock most of it in. I once had a Yen trade where I was
risking three ATRs from my entry. Once the trade had a profit of five ATRs
(about$4500) I reduced my stop to only 0.5 ATRs and let the trade run. It was
finally closed out with a profit of over $16,000 per contract. This is
unusual but I show it as an example of why it is worth giving a big winner a
little slack in hopes of getting more.
On short term and counter trend systems I find it is best to take the profit
at the target and run. These trades are not intended to be big winners and we
have such a small profit margin that we can't afford to give any back.
Chuck
traderclub.com
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