Another Post About Exits

I have written about exits a few times and will do so again as I get lots of questions about what is probably the most critical part of trading.

A trader has control of only two things: when he enters and when he exits. Again repeating Pete Steidlemayer's words:" Just get the trade on and manage it", we need to have a comprehensive exit strategy as part of our trading plan.

When I put on a trade I have a vision of what the market is doing but I cannot know where it will go. All it needs is one or more large traders with an opposite view and my vision is history. I can probably see that the market will get to my first logical scale out point and after that, "I dunno" as they say in Oz.

I have accepted my limitations and have built my own workaround. I scale out. I take some profits all along the road. I know that it means that when i am wrong I will take a 100% hit and if it only gets to my first scale out point then I will have a 33% profit. But I have a high win rate. That is my protection and that is why the maths work for me.

A perfect example is trade #4 today. It was a buy because I was trading the Gap trade and the picture came together right at yesterday's VAL. wasn't difficult to trade. But then I had to manage it. My vision was a trade to the VAH. But my first logical scale point was 1167.50 and I took 1/3rd profit there even though I envisioned a trade to the VAH at 1169.50. I wasn't certain that it would go there. I was also ready to bail the whole position if the picture changed. If it had rocketed through the VAL then maybe I would still hold a piece until I thought it had run out of gas.

Exiting is all about the vision and the order flow and momentum as the vision unfolds. Making hard and fast rules is not the way I go. I am a discretionary trader and I use that discretion on the basis that I keep taking profits all along the way until I run out of bullets. Once I get that trade location, I don't want to just throw it away for 2 points.

 I'm writing this after watching the market get to 1169.00. I am out of 2/3rds and will look at what happens at yesterday's close of 1170.50 ish. EMAs are horizontal with trade on the correct side of them. Whatever else happens, I have a free trade now with my stop at break even plus a tick.

Price went through the VAH where I exited half of what I had left. I exited the balance at 1170.00 on the way back into the DVA.

That was a fairly typical way of managing a trade. the fact that it was a VAL to VAH trade made it easy to explain in writing, which is not always the case.