Monday, February 2, 2009

Monday 02/02/09 - It's the Exits That Pay You

Mondays are filled with too many meetings so only Sim trades today. I nailed some terrific entries, but was too quick to move my stop to break-even, so did not realize any gains. Here's a chart of my entries/exits from today:

Those entries are Golden! Now I just need to figure out how I can pull profits from the entries. Both of these trades were mean-reversion setups, with the Long being a combo of mean-reversion and double-bottom. In both cases, price was extended beyond the value areas. I'm thinking in these scenarios, perhaps I should leave the initial 2-point stop in place until price moves 2R in my direction (4-points), at which point, I would move the stop to break-even. Once price moves 3R (6-points) in my direction, move stop to +2 points, and continue the process until price action stalls, and signals a possible reversal. Of course this rule works like a charm if I just look at today's trades, but I don't have sufficient data to know how it will work over time, so I'm still undecided on this. You guys have any feedback/thoughts on this topic?

Gap Filled

TF/TICK (3-min)

ES/TICK (3-min)

ES Market Balance (5-min Continuous Contract)

ES Market Balance (5-min Day Session Only)

TF Market Balance (5-min Day Session Only)

Looking over today's charts, the TF "looks" like an easier instrument to trade. It bounced off it's mid-point pretty nicely in the afternoon.


  1. From what I've seen, the stop placement you talked about should work if a higher time frame like the 6-minute (3 times greater than the time frame your using)also has a strong divergence to help support the longer run you'll need to get that many points.

  2. Michael, I was just using the 2 min chart to show the trades. I use a 5-min chart for trade setups, and a 610 tick chart for execution.

  3. 2R to par is one way to do it and I can't say it would be better or worse than any other method.

    The only thing about it is that it might not dynamically resize to the initial swing (and your initial risk) because you could have a tiny swing that might not have a lot of potential but a larger initial risk, or likewise a massive swing that you get a great fill on which is going to potentially get you out too quickly.

    I'm sure it will work just as well as anything else... thats just what a concern of mine would be. Your entries look solid though!

  4. Yea, I think trade management is more of an art than a science, so continued practice/experience will hopefully shed some light on the subject. I want to capture the big moves, but at the same time, want to limit my risk so moving stop to par is important to me. I think AustinP moves stop to par at 1R (2 pts). We'll chat about this some more tomorrow.

  5. I didn't do a good job on the first post, I'll fill in what I missed.

    I too use the 610 tick for execution, what I've noticed is, the longer runs tend to come when my next higher time frame the 1800 tick forms a double top or bottom and MACD-histogram forms a strong divergence. Same thing with daily charts, they tend to have bigger moves when the weekly chart shows a divergence signaling the longer term trend is reversing.

    So if you back test this, try using a time frame 3-4 times greater than what you execute off of, and see if that chart also looks like it's about to make a good move.

    I don't know if this will work for the setups your trading, I've tried to find ways to play longer runs too, but have had a hard time staying in the trade long enough when price sometimes makes a deeper pullback and scares me out thinking the run is ending.

  6. I don't really see the point of moving your stop to B/E if you don't realize any partial profit ?
    I mean, I usually move my stop to B/E once I have covered half (or more) of my position. Otherwise, why bother changing the stop ? Either your setup works or it doesn't but if nothing concrete has happened (i.e. neither stop or target was reached), then let your setup live its life :)

    "Letting the winners run" is a nice thing and all, but it's one thing to believe in it and another to make it an actual exit strategy. You use S/R levels, why don't you use them as targets to exit gradually ? I don't know what your setups are, so it's merely a suggestion rather than an advice.


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