Traderji.com - Discussion forum for Stocks Commodities & Forex


Exiting a trade

Discuss Exiting a trade at the Technical Analysis within the Traderji.com - Discussion forum for Stocks Commodities & Forex; Exiting a trade How not to loose too much of your trading capital. Upon entering ...


Go Back   Traderji.com - Discussion forum for Stocks Commodities & Forex > METHODS & STRATEGIES > Technical Analysis

Technical Analysis Discussion of all the principles involved in technical analysis.


Reply
 
Thread Tools
  #1  
Old 10th August 2005, 03:56 PM
Super Moderator
 
Join Date: Jun 2004
Posts: 1,778
Thanks: 2
Thanked 784 Times in 126 Posts
Traderji has disabled reputation
Default Exiting a trade

Exiting a trade

How not to loose too much of your trading capital.

Upon entering the trade, if you place a sell stop below the market if you're long (buy stop if you're short), you know right away how much money you will lose in any given trade. You should never trade without employing stops. Thus, you should never be in a trade and have a losing position and not know where your exit point is going to be.

How to lock in larger than normal PROFITS in a winning trade.

You should always stay with your profitable trades as long as possible because the trend is likely to continue and make your profits even larger.

This is easy to understand but not so easy to do when real money is involved. The difficulty is that although your profit may become much larger if you stay with a trade, it may also decrease and even disappear. Human nature is such that it values a sure profit much more highly than the probability of a much higher profit. Thus, traders are inclined to take their profits too soon which can be fatal to long-term success because big profits are necessary to overcome the inevitable collection of small losses.

There is a good way to let profits run while still guarding against the possibility that prices will turn around and take away much of your accumulated profits before the trend actually reverses. It is called a trailing stop. You include in your plan a method for moving an exit point along some distance behind your trade. As long as the trend keeps moving in your favor, you stay in the trade. If the market reverses direction by the amount of your trailing stop, you exit the trade at that point.

A trailing stop moves to lock in profits as the trade moves in the traders favour, it should never be moved backwards. There are many different ways to calculate a trailing stop:

Volatility - the stop is calculated as a percentage of the average true range of x periods.

Rupee Amount - A set amount determined before the trade is entered.

Channel breakout - exit a long position at the low of the last x bars.

Chart patterns - ie move the trailing stop behind each consolidation as it forms.



Reply With Quote
The Following User Says Thank You to Traderji For This Useful Post:
vmonu (3rd June 2010)
Sponsored Links
  #2  
Old 10th August 2005, 04:17 PM
Member
 
Join Date: Mar 2005
Posts: 2,885
Thanks: 94
Thanked 643 Times in 183 Posts
AMITBE is a splendid one to beholdAMITBE is a splendid one to beholdAMITBE is a splendid one to beholdAMITBE is a splendid one to beholdAMITBE is a splendid one to beholdAMITBE is a splendid one to behold
Default Re: Exiting a trade

Quote:
Originally Posted by Traderji
Exiting a trade

How not to loose too much of your trading capital.

Upon entering the trade, if you place a sell stop below the market if you're long (buy stop if you're short), you know right away how much money you will lose in any given trade. You should never trade without employing stops. Thus, you should never be in a trade and have a losing position and not know where your exit point is going to be.

How to lock in larger than normal PROFITS in a winning trade.

You should always stay with your profitable trades as long as possible because the trend is likely to continue and make your profits even larger.

This is easy to understand but not so easy to do when real money is involved. The difficulty is that although your profit may become much larger if you stay with a trade, it may also decrease and even disappear. Human nature is such that it values a sure profit much more highly than the probability of a much higher profit. Thus, traders are inclined to take their profits too soon which can be fatal to long-term success because big profits are necessary to overcome the inevitable collection of small losses.

There is a good way to let profits run while still guarding against the possibility that prices will turn around and take away much of your accumulated profits before the trend actually reverses. It is called a trailing stop. You include in your plan a method for moving an exit point along some distance behind your trade. As long as the trend keeps moving in your favor, you stay in the trade. If the market reverses direction by the amount of your trailing stop, you exit the trade at that point.

A trailing stop moves to lock in profits as the trade moves in the traders favour, it should never be moved backwards. There are many different ways to calculate a trailing stop:

Volatility - the stop is calculated as a percentage of the average true range of x periods.

Rupee Amount - A set amount determined before the trade is entered.

Channel breakout - exit a long position at the low of the last x bars.

Chart patterns - ie move the trailing stop behind each consolidation as it forms.
Very lucid and comprehensive, Traderji.
There is so much to learn from your forum.
Thank you again for another informative piece.
Reply With Quote
  #3  
Old 10th August 2005, 04:21 PM
Member
 
Join Date: Mar 2005
Location: Kolkata
Posts: 494
Thanks: 1
Thanked 6 Times in 5 Posts
joy_mitali is on a distinguished road
Default Re: Exiting a trade

Dearest Traderji---
Excellent post on Trailing Stop----But Plz---If u describe in a bit details ---the diff methods of deducing a traling S.L.----or some web--references of calculating trailing S.L. for those who do not have an online trailing S.L proving software---it would be a great help for everyone-----

This article ---I feel is a must read(repeated times) for everybody----even for day-traders like many of us---

Regards,
joy_mitali
Reply With Quote
  #4  
Old 10th August 2005, 05:18 PM
hmp hmp is offline
Member
 
Join Date: May 2004
Posts: 388
Thanks: 298
Thanked 107 Times in 68 Posts
hmp will become famous soon enoughhmp will become famous soon enough
Smile Re: Exiting a trade

Dearest Traderji,
Thanks A Lot For Excellent Post As Always. I Certainly Agree With What Joy Says. Pl. Give Us Some Guidence About How To Put A Proper Stoploss. Esp. For Those Who Doesnt Have Any Technical Knowledge And For Traders Who Sits Before Brockers Terminal Full Day And Doesnt Have Any Tool With Them To Judge Where To Put And How Much To Move Stoploss With Their Running Position To Protect Their Profit.
Regards
Hmp.
Reply With Quote
  #5  
Old 10th August 2005, 08:53 PM
Member
 
Join Date: May 2005
Posts: 205
Thanks: 39
Thanked 3 Times in 3 Posts
phoenix will become famous soon enough
Default Re: Exiting a trade

Nice article,Traderji....thanks !!
Reply With Quote
  #6  
Old 10th August 2005, 09:37 PM
karthikmarar's Avatar
Member
 
Join Date: Jul 2005
Location: kuwait
Posts: 1,527
Thanks: 75
Thanked 1,122 Times in 193 Posts
karthikmarar has much to be proud ofkarthikmarar has much to be proud ofkarthikmarar has much to be proud ofkarthikmarar has much to be proud ofkarthikmarar has much to be proud ofkarthikmarar has much to be proud ofkarthikmarar has much to be proud ofkarthikmarar has much to be proud ofkarthikmarar has much to be proud of
Default Re: Exiting a trade

Quote:
Originally Posted by Traderji
Exiting a trade

[ There are many different ways to calculate a trailing stop:

Volatility - the stop is calculated as a percentage of the average true range of x periods.

Rupee Amount - A set amount determined before the trade is entered.

Channel breakout - exit a long position at the low of the last x bars.

Chart patterns - ie move the trailing stop behind each consolidation as it forms.
Traderji

Such informative posts makes visting this forms daily fruitful. Can you please elaborate on the above. Thanks

karthik
Reply With Quote
  #7  
Old 11th August 2005, 10:36 AM
Member
 
Join Date: Nov 2004
Posts: 132
Thanks: 0
Thanked 6 Times in 1 Post
hometypist is on a distinguished road
Default Re: Exiting a trade

Traderji,

Very informative and useful. Thanks.
Reply With Quote
  #8  
Old 18th August 2005, 11:07 AM
Member
 
Join Date: Jan 2005
Posts: 517
Thanks: 0
Thanked 2 Times in 2 Posts
ssnkumar is on a distinguished road
Default Re: Exiting a trade

Hello Traderji,

This is the first time I am reading such article: "How to reduce the losses"!!
But, will it be possible to come out with one or two examples so that, I can understand it better?

Regards,
Narendra
Reply With Quote
  #9  
Old 17th September 2005, 07:42 PM
Member
 
Join Date: Aug 2005
Location: mumbai
Posts: 5
Thanks: 0
Thanked 0 Times in 0 Posts
hkvora is on a distinguished road
Default Re: Exiting a trade

hello tradji,

thanks a lot for such a informative article.

hkvora
can you explain about FUTURE PRICE= SPOT PRICE +COST OF CARRY
DURING THE TRADING HOUR IF COST OF CARRY INCEASES OR DECREASES
OR FUTURE PRICE IS MUCH LESS THAN SPOT PRICE WHAT INFORMATION WE
SHOULD THINK OF .
Reply With Quote
  #10  
Old 18th September 2005, 10:29 AM
Member
 
Join Date: Feb 2005
Posts: 14
Thanks: 0
Thanked 3 Times in 2 Posts
esanthosh is on a distinguished road
Default Re: Exiting a trade

I am new to trading. So traderji correct me if I am wrong. Let me give you an example of short-term trading.

Trailing stop-loss may differ from person to person. Mostly it is based on how much of profits you want to lock-in. Suppose you bought a stock for Rs. 50 with a target of Rs. 75. If the market starts to fancy the stock, it goes beyond your original target of Rs. 75, you would be better of riding the momentum. So you employ a trailing stop-loss of say, 5% below Current Market Price. If the stock closes/trades below your stop-loss, you get out of the stock. Ideally, if you have a long-term perspective then it makes sense to keep your trailing stop-loss lower, say 8-10% so that short-term market fluctuations are evened out. It is upto you to determine what is your "uncomfortable" level - the price below which you start feeling jittery.


Reply With Quote
Reply

Bookmarks


Advertise Here


Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads for: Exiting a trade
Thread Thread Starter Forum Replies Last Post
Trading with money I cannt afford to lose hometypist Trading Psychology 9 20th November 2013 03:31 PM
Trading Without Ego Anil Words of Wisdom 12 9th September 2011 07:32 PM
How to exit a successful trade! Traderji Risk & Money Management 54 12th May 2009 10:10 PM
Calculate your trade size CreditViolet Software 8 9th April 2006 03:08 PM


All times are GMT +5.5. The time now is 03:06 AM.

Indemnity, Disclaimer & Disclosure Notice:
By visiting Traderji.com you automatically indicate that you agree to our Forum Rules, Indemnity, Disclaimer & Disclosure Notice and General Content Disclaimer Notice and indemnify Traderji.com, its associates and related parties of all claims howsoever resulting from the usage of the forum/site.
Disclaimer: Trading or investing in stocks & commodities is a high risk activity. Any action you choose to take in the markets is totally your own responsibility. You are recommended to make appropriate enquiries and seek appropriate advise before sending money, incurring any expenses, acting on recommendations or entering into any commitment in relation to any advertisement published here. Traderji.com does not vouch for any claims made by the advertisers of products and services. Traderji.com will not be held liable for any consequences in the event such claims are not honoured by the advertisers. Traderji.com will not be liable for any, direct or indirect, consequential or incidental damages or loss arising out of the use of any information by anybody mentioned anywhere on this site.
Disclosure: The information in this forum is neither an offer to sell nor solicitation to buy any of the securities mentioned herein. The writers may or may not be trading in the securities mentioned.
All names or products mentioned are trademarks or registered trademarks of their respective owners.
General Content Disclaimer Notice:
In light of our policy of encouraging candid, open exchanges of views and the rapid distribution of information originating from many sources, Traderji.com cannot determine the accuracy or legality of any information that may be uploaded to the forum. Opinions, advice and all other information expressed by participants in discussions are those of the author. You rely on such information at your own risk. You are urged to seek professional advice for specific, individual situations and not rely solely on advice or opinions given in the discussions. Since Traderji.com is an open and free discussion forum, any comments made by members of this forum in their posts reflect their own views and not of the owner or administrator of Traderji.com. Thus the owner/administrator indemnify themselves of all claims whatsoever and will not be liable or responsible for any members comments/views in this forum Traderji.com. Although we constantly delete all irrelevant content and/or SPAM, if you should find any objectionable or offensive posts made by members of this forum which you would like to bring to our notice for removal then please Contact Us.
 


Copyright © www.Traderji.com 2001 - , All rights reserved.

Recommended Websites - www.TradersEdgeIndia.com - www.TradingPicks.com - www.MasterOfTrading.com

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246