EXIT STRATEGIES: Money ManagementHey traders,
Today I wanted to dive into exit strategies. A lot of you will already have a very clear understanding of what an exit strategy is and how you usually go about it. Most of you are probably automatically thinking of stop losses and take profits, which is fair enough. Today however, I wanted to dive into some more advanced techniques. I want to have a look at what you need to be thinking about prior to entering a trade, during the trade, and then finally when it's time to get out. Yes, we use stop losses. Yes, we use take profits. But I know from my experience personally, it's very rare that I actually get my full stop loss hit. I'm usually out of the position prior to those levels.
This all falls under money management, which is by far the most important aspect of your trading ability that you need to understand. We are money managers as traders. When we are risk on, we have money live in the markets. It is our job to manage it accordingly. Win or lose, the success comes down to if we are managing position and risk correctly.
Now, this blog is a little bit more directed to our day traders or people who are constantly having positions with the whole idea of set stop losses and take profits. For investors, it does differ a little bit and I'll touch on that now. When it comes to buying a stuck or an asset, it is very easy come up with a trade idea. You find the idea, you buy, simple. What makes it really difficult is actually finding the appropriate time to sell. That's what actually makes the good investors. Because equity, yes, it is still extra cash in your pocket, but you don't get that cash actually in your pocket until you have hit that sold button and realized your profits. My biggest outlay to anyone in any type of investing is have an exit plan prior to entry. Have a minimum requirement, have a maximum requirement, and what to do in those scenarios. I've seen it many many times before, especially with the recent cryptocurrency boom that people just get in expecting it to go up with no exit strategy, so they never exit because it's constantly moving up. Then, Unsurprisingly, the market pulls it back in and they lose all of their equity profit. They find themselves trying to close out of their position before it's a big loss. Always have an exit plan.
Now lets dive back into more of the day trading market. When it comes down to exits of the market. Most people use stop loss orders or take profit orders. These are orders you can set on your brokerage platform, which essentially, when that asset reaches a certain price, the server will read that and automatically pull your position at your requested price. These are the most common ways to manage risk. It's a very beginner friendly. It's very easy to find an area where to put your stop loss, put your stop loss, put your take profit, walk away and let the trade unfold. However, today, let's get a little bit more advanced.
There are a few questions you need to ask yourself prior to entering a position. Regardless of looking at the profit potential (which is the biggest pull). Start associating yourself with the risk you are taking in order to open this position.
The first question I want you to ask yourself is, how much are you willing to risk on this trade?
Risk is an important factor when investing right to determine your risk level. You need to understand what is not going to affect or hurt you, but still generate enough profits to make it worthwhile in your eyes. Finding that medium balance of what you can handle when you go and drawdowns is going to be highly beneficial to risk the right amount and not go emotionally insane every time you're in a position. Once you understand what dollar value you're willing to risk, then you just position size accordingly and have a stop loss on your chart and there you will know your maximum risk. That is what you are going to lose if all goes against you on this position.
Once you have the basic understanding of how much you're risking per position, you want to try and avoid hitting that stop loss at all costs. So while you're managing your position (this is something I like to do personally) if everything is going against you, it's usually a sign that it's going to continue that way. Yes, statistically, there's going to be sometimes it may be reverses. That's the beauty in backtesting your strategy so you have an in-depth understanding on what it is capable of. I look to start scaling out of my position, which means selling off my position size as we move towards the stop loss. As I mentioned above, it's very rare that I actually hit my Max loss stop loss statistically. Looking back at my journal, I've actually scaled more than 75% of my position out prior to hitting a full stop loss if not all of the position. This is giving me an incredible advantage when it comes down to statistics, because while I can still hit a full take profit and a full position in profits. But I am not hitting a full loss, so my risk to reward has actually rapidly increased, even though it's still very similar when I'm entering the trade.
The second question I want you to ask yourself is, where do you want to get out?
Where is your take profit? Where is your stop loss? But also look within those areas where realistically are key indications on where this price is going to move. Do you have to get through four or five support levels to reach your take profit? Should you start looking at scaling out some of the position in the profits around those levels? The more you have to go through, the harder it is going to be to actually achieve the profit. Have an exit plan. Where are the levels you want out?
And finally, and this is probably the biggest one, how long you are planning on being in the trade?
If you're trading down on the five minute chart, do you really want to hold this trade for two days? If it takes that long, do you only want to be trading during this market hours? Where do you want to cut this trade? This is really important because most people, especially the set and forget traders, they don't have a time limit on their trades. They allow it to just run over multiple sessions. But The thing is, the longer it runs, the less than analysis becomes true. Have a look at the time frame you're trading. If you're investing, look at the yearly outlook. How long do you really want to be holding this stock before it actually does something? I know we're not options traders. Some of you, maybe, but it is a good idea to have kind of a time scheme that you don't want to be holding any longer than. I personally look to start scaling out of the position, taking risk off the longer the trade takes, especially if I'm trying to trade on volatility.
These are three questions to ask yourself and a little bit of tips and tricks when it comes down to scaling an managing risk on a more advanced level. Remember, as traders and investors, we are risk managers. We are money management specialists. Our job is to not lose money. When we stop losing money, profits will come in. Focus on your risk, focus on what you can afford to lose, and then focus on your positions and try and stop yourself from ever hitting that Max stop loss that you give yourself.
I wish you all success!
-Jordon Mellor
Exitsignal
It's time to Exit !A broken trendline is a technical signal that can suggest a change in trend is at hand. If low volume (rather than high volume) accompanies the break of a trendline, the signal is not as strong or convincing. It can make sense to wait a day or two to make sure that the trendline break is legitimate.
A pullback is a pause or moderate drop in a stock or commodities pricing chart from recent peaks that occur within a continuing uptrend. A pullback is very similar to retracement or consolidation, and the terms are sometimes used interchangeably.
BTCUSDT|Crypto|big descending wedge broke !!Eventually the big descending wedge broke ;
I marked the important points in the chart.
But we have to give the chart some time to make its pattern and we can make a more logical decision with its help.
What is clear now is the breaking of the descending wedge.
Here the best strategist is the outflow of capital in the Pullback area.
Depending on the price behavior, we can expect the price to drop to $ 44,000 from Bitcoin ; so be carful
Good Luck
Entry and exit strategy for Bitcoin pt2Hello everyone,
In my last post I've provided an update regarding Relative Strength Index (RSI) and how two overbought signals on monthly chart can be used for exit strategy in cryptos, especially Bitcoin.
As you can see at the bottom of the new chart, we are quickly approaching the first RSI bubble and value of the RSI is already around 91 points (1st April 2021).
This time I would like to share with you the newest version of the aforementioned analysis, which includes Reverse Pi Cycle Top Indicator. The Standard Pi Cycle Top indicaotor (i.e. 2x EMA250 / EMA111) was already very good and quite precisely indicated top of the Bitcoin bubble when those two exponential moving averages crossed. However, with logarithmic scale and reverse function we observe and blue line that has to cross EMA250/EMA111. When blue line dives and cuts through exponential movinf averages then the top of the price is ultimately achieved! Thanks to this indicator we can precisely estimate how long will it take for the lines to cross instead selling before the price peak.
Another great indicator that can be used for our exit strategy is Net Unrealized Profit/Loss NUPL, however access to on-chain data is not available via TradingView and additional website i.e. Glassnode would have to be included.
I believe we are very close to the top of the first RSI bubble, this information is supported by Reverse Cycle Top Indicator, NUPL or Puell Multiple www.lookintobitcoin.com and other e.g. MVRV Z-Score www.lookintobitcoin.com
From my perspective, soon we are going to see higher price of Bitcoin, potentially up to $70k or even a bit more, however we should not get greedy and sell the coins before the price drop by 50-60%, exactly as in previous cases when RSI was overbought or Pi Cycle reached it's peak.
Don't wait for too long with selling of your cryptos as there may be a massive sell off and exchanges may get clogged/blocked due to amount of volume and people dropping their coins at once.
Regards
Simon_says
How Do You Know When To Exit A Trade? Hey Traders 👋
Today I wanted to share with you a quick lesson that has helped me with knowing exactly when to enter and exit trades....
First:
Add the 4 and 10 period moving averages to your chart
Second:
When the trend begins let your profits ride until either
A) A Candle closed above or below the 10 moving average (you could close early, but its the most profitable exit)
B) The 4 and the 10 MA cross back over eachother at candle close (less profitable, but more concrete)
I hope this helps with increasing profit instead of hoping and guessing! Take a look for yourself and see if this is something that you want to implement on your charts and strategies!
CMCSA 1D BIG 3 INDICATORBig Three Sub-Chart Indicator turned Green after the Day Candle Closed for an Entry Signal.
Big Three Sub-Chart Indicator shows a Long Entry Signal when the Sub-Chart Bar turned Green after the Day Candle Closed.
Big Three Indicator shows a Long Entry Signal when the Big 3 Indicator background turned Green after the Day Candle Closed
Entered Long Trade at Daily Candle Close.
Close Trade when Sub-ChartBar & Big 3 Indicator Line changes to Yellow or Red.
RVI TUTORIAL OIL EXAMPLE 5/5 WINNERSSo I am going to breakdown an indicator that I have featured alot in my trades, so if we look at the crude oil chart here, we can see that in total we have 5 notable crosses of the rvi indicator, 3 bearish trades and 2 bullish trades for a total of 510 pips, 5 winners out of 5. Now the magic of the indicator is that it is both an entry signal and an exit signal, enter on cross exit on cross to maintain maximum pips. Personally i find relative vigor index very useful when used in conjunction with good trading ideas and good structure analysis.
BTCUSD 12h buying dips, setting targets, resistance and support I plan to place my bets that we are in the beginning of a parabolic rise of the BTCUSD asset.
Lets sketch a trading plan. The trading plan needs to address the following :
1) When to enter. (just happened I placed the first entry at about $9,300)
2) When to take profits (just happened I took some already at $11,100)
3) When to re-enter, or to add to the position (a.k.a pyramiding. I added some at $10,800, and just re-entered at around $11,300)
4) how much to risk. I suggest risk levels at 5 to 10% of the total trading account equity for leveraged trades. (that what I do - not responsible for your losses, only for my own)
3) where to place a stop loss (if any). or trailing stops (if any).
4) when to exit the trade entirely.
Things we will need to enable the above plan.
1) trading signals. I suggest simply go by using 3 moving averages. ema20, ema50, ema200 looks good (guided somewhat by back-testing to 2018).
2) support and resistance levels. I suggest a Fibonacci trend extension to draw them. I will use the one that assumes March 2020 crash is an unusual sell-off not related to anything important. It is also useful a to be guided by whether the resulting levels correlate with obvious resistance/support lines on the chart. In the case shown in the chart - the -0.236 level of the extension picked the March 2020 bottom, the 0.236 level ($8,968) has served as solid support in the months of June and July, the 0.382 (at $10,538) seems also to nicely coincide with a multi-year resistance horizontal line that has been broken recently (though, not re-tested on longer time frames, and this fact does add some risk to the plan)
Hence is the plan :
1) we define bull market when the price action is consistently above ema200. ("consistently" would mean both ema20 and ema50 are above ema200 for several periods)
(of course, we are still considering fundamentals, news, and sentiments - we are not trading robots. we do better. sometimes we do give in to FOMO, yes. Sometimes we trade on emotions, and sometimes we convince ourselves we are in a bull run, just because we want to be in one, and sometimes we chose to ignore the raging pandemic in its entirety. What I am saying, as humans, we are still better at recognizing patterns and using intuition. And if FOMO is too strong, lets go for it. with an appropriate stop loss.)
2) We will consider taking profits at major resistance levels. - $11,808 ; $13,077, $14,884, $17,185, $23,800. We can also use these as profit taking targets for leveraged trades.
3) to re-enter (or to add to the position) - we will consider points when the BTCUSD touches ema20, and we will double down when it touches ema50. For leveraged longs we will place stop-losses below assumed support levels (at the current moment - its somewhere below $10,500
For spot trading - we will not use any stop loss. or, if you cannot, i mean, absolutely cannot live without some stop loss, and itching to liquidate all BTC- let it be $8,900
4) Apart from our profit targets, we will also consider exiting the trade when ema20 crosses ema50 followed by a touch of ema200. when price action along with ema20/50 is below ema200, we will proclaim it to be the end to the bull market.
How to use the Oscar OscillatorOSCAR Oscillator by GenZai
Green line is the Oscar Rough
Red line is the Oscar
By default based on the 8 last candles and smoothed using RMA
Purple line is the Slow Oscar
By default based on the 16 last candles and smoothed using WMA
HOW TO USE
Exit signaling
This indicator can be used as an exit indicator when line cross each other.
Entry signaling
When the green line crosses up, it indicates a long entry
When the red line crosses up, it indicates a short entry
Overbought/Oversold
When the indicator crosses the dashed grey lines it indicates Overbought Oversold
Slow Oscar Add-on
This is an Add-on to the orignal Oscar indicator
Can be hidden if you want the original experience of the Oscar indicator.
Can be used as a confirmation indicator by looking at the direction of the slope to verify is your are trending long or trending short.
Can be used as a baseline to confirm signals given by Oscar
Can be used to tweak your signals and test different settings.
Stock or Forex?
The program was originally written for stocks, but works equally well with the Forex market.
How this indicator is calculated ?
This is the formula we use to calculate the Oscar:
let A = the highest high of the last eight days (including today)
let B = the lowest low of the past eight days (including today)
let C = today's closing price
let X = yesterday's oscillator figure (Oscar)
Today's "rough" oscillator equals (C-B) divided by (A-B) times 100.
Next we "smooth" our rough number (let's call it Y) like this:
Final oscillator number = ((X divided by 3) times 2), plus (Y divided by 3).
SETTINGS:
You can choose between different smoothing options:
RMA: Moving average used in RSI. It is the Adjusted exponential moving averages (also known as Wilder's exponential moving average)
SMA : Simple moving average
EMA : Exponential moving average
WMA : Weighted moving average
The Script can be found here:
OSCAR Oscillator by GenZai - NNFXOSCAR Oscillator by GenZai
HOW TO USE
This indicator can be used as an exit indicator when line cross each other.
Please don’t hesitate to comment to tell us how you use it.
Data used to create the indicator:
I’ve created this indicator using the formula given in this PDF given by Jim4x
www.forexfactory.com
SCRIPT:
HIGH VOLUMES ON CREDIT SUISSE - PREPARE NOW - TVIX - 30MNThank you for your likes! Much appreciated! Please also share to benefit to the community.
________________________________________________________________________
After a long run down, we notice that the TVIX is suddenly running in the opposite direction.
Huge volumes are present now . Possibility of a live observation of the end of the uptrend.
Prepare to enter , with a probability of seeing the price returning to the blue doted line corresponding to an historical resistance .
If you already have positions and could gain through this up move, it is time to get out and wait for new entry.
EURCHF 1D HEIKIN ASHI EXIT STRATEGYShort Trade
Step 1 Assume Entry on middle of 2nd bearish candle
Step 2 Assume Exit on middle of Reversal bullish candle
Result 100 pips
Long Trade
Step 1 Assume Entry on middle of 2nd bullish candle
Step 2 Assume Exit on middle of Reversal bearish candle
Result 60 pips
ES1! 1D PARABOLIC SAR EXIT STRATEGYInstall Parabolic SAR Indicator onto your chart
Change settings to this:
SAR Settings
Input
Start 0.01
Increment 0.01
Style
Color Orange
Width #2
Current chart is in a long trade as price broke above resistance level
Use SAR symbols as an Exit Signal
EXIT when Price either
1 Touches SAR symbol or
2 Price closes below SAR symbol
VERGE USD 1D 2 PERIOD RSI STRATEGYStep 1 Add RSI to chart
Change RSI period setting to 2
Change RSI levels to 5 & 95
Step 2 Sell when the 2-period RSI indicator crosses above the overbought 95 level or
Buy when the 2-period RSI indicator crosses below the oversold 5 level.
Step 3 Find appropriate SL
Step 4 Take Profit when the 2-period RSI indicator crosses
Sell-below oversold 5 level/Buy-above overbought 95 level
BTCUSD 1D TRADERS DYNAMIC INDEX STRATEGY ENTRY RULESTraders Dynamic Index Strategy Entry Rules
1- Red Line break above Yellow Line
2- Green Line break above Yellow Line
3- Neither Line break above Blue Line
4- Buy when Green Line close above Yellow Line
5- SL below SwgLow or 1,5xATR (min 10 pips)
6- TP when Red & Green cross below 70 level
CADJPY 1H 5 CANDLE MASTERY INDICATOR STRATEGY5 Candle Indicator will paint a green column t indicate a long trade is being setup
5 Candle Indicator will show Buy Entry Signal
Red line below price is an adjusting SL
5 Candle Indicator will show an Exit Signal
Or Exit when green line falls below red line