Exit Strategy

[Rimu]

A while ago I completed a review of my past years tardes, and found that with a 38% win rate I came out comfortably in front due to the RR money management principles in my trading plan. Despite this I still found myself under emotional pressure to change/abandon my trading plan due to a lot of losing 1R tardes. Of the losing trades I found that around 70% of them made it to a 1R profit before retracing and taking out my initial stop.
To reduce the frustration and doubt caused by these many small losses I now only take a trade if I can get a minimum position of two lots, and treat them as separate trades. Half of the position I monitor on 1 hourly charts(all my trades are 240 min and daily forex and stocks) and as soon as it reaches a 1R profit I set a stop/sell at the low of the first bar above the 1R line(above if shorting) and move it with each subsequent bar. The remaining half I trade acording to my set trading plan profit zones(WPT's in MTP).This has converted the bulk of my losing 1R trades into B/E trades at worst, and has removed most of the emotional pressure to change my plan. Surprisingly the bottom line has not noticably altered.
My last closed trade was an AUDUSD 240 long which normally would have resulted in a 1R loss, but ended up B/E9minus spread). A current trade I am in is a USDJPY 240 short, 2 lots sold at 1.3R and the remaining 2 lots are now therefore risk free and lurking around the 1R area. No pressure to sell prematurely.

[mrkam]

I find myself in the same situation often, sweating the 1R losses, when I know good and well it is just goes with the territory, and knowing the larger R winners are coming right along soon.... I however trade the 3/5min eminis, where (especially recently!) a lot of big winners (8R, 10R) quite often retreat into the initial risk zone before making their big move. And, quite often they exceed 1R profit before retreating!! Usually, I don't even use the 100% (1R) profit/move-stop-to-B/E guideline at all, moving only when approaching the first WPT. (which is tough, seeing a good 2R gain evaporate into the initial risk area, sometimes stopping for a -1R!!! that hurts.... but then again, we see a few of these jump back to 6R or more sometimes!)

I would be curious as to how often you see your new exit strategy come into play, although I guess you pretty much just started it! Meaning, how often your markets retreat back into the risk zone before making their move..

I guess the proof is in the puddin', or the brokerage account as the case may be. If your bottom line is the same, with less losses, more break/evens, and not-as-big gains, then I'm in!

Plus, there are all those quotes about preserving what you have, minimize your losses, etc....

Thanks for the note. Worth some noodling for sure, and maybe others to chime in!

[Rimu]

MrKam..
Yes I have only been trialing this realtime for a half dozen trades so far after 12 months of hindsight testing so can't draw any solid results yet, after 6 months or so I will probably be able to decide if it is worthwhile for my trading style. I had been trying a combination of mov aves but found them too sluggish on faster moving trades.
I'm not too sure how it would handle the shorter time frame trades, particularly the 3 min charts, my trades are on 240 and EOD so the candle/bar range size usually means an average RR profit of around 3, whereas I guess the 3 min candle range would be considerably smaller resulting in a larger average RR on winners, which may mean that this method could cost a lot of potential profits in exchange for a possible smaller drawdown?
The open short I have on USDJPY240 stopped short of 2RR (net of spread and slippage) last night..aussie time that is.. before retreating rapidly back into the risk zone where it is now resting up, ordinarily I would be sweating on a possible 1RR loss, instead I have a miserly :D .3RR locked away regardless of what happens, and have the bonus of the original stoploss still controlling the remaining half of the trade, so I am still in there if it decides to obey the laws of gravity and head south.