Exit Plan - En Khalid

EXITS: BEFORE TAKING ANY TRADE, KNOW THE TWO EXIT DOORS

ENTRY is important but EXITS are far more important. EXIT determines the outcome of our trade.. Surprisingly most newbies and the oldies alike have difficulties handling EXITS - ini kes tau masuk tak tau keluar - and some not paying enough attention to or couldnt be bothered about EXIT strategies/rules at all. - and eventually have to pay huge price for that.
- turning small losses to bigger losses
- turning profitable trades to losing trade
- turning huge profit to much smaller profit

hey! you are not alone..thinking I hv done all that, its so amusing-ooops! sound like Frank Sinatra's my Way

There are many types of exit rules but generally they fall under two categories: TARGETs and TRAILLING STOPs (raising the stop position as the price advances). A simplified ones are as stated below. My ninja master …ehem..ehem..said " before entering a a battle (trade) , we need to know the two EXIT DOORS, upfront. EXIT DOOR No 1. Is when the market is against us , and EXIT DOOR No2 is when the market is moving in our favour. Of course larr Ninja kalau kalah terus harakiri... and most of us unconciously doing that by continue holding losing positions until no more money left ... ooooop! am I talking about me or you here ?????
so, KNOW THE TWO EXIT DOORS BEFORE ENTERING A TRADE....period.. in trading better be a coward ninja...RUNNNNNN, no need to be a HERO by committing harakiri larrr... ok... there is always another round of battle.

EXIT DOOR NO. 1: when the market is against us and we are in losing position, when other people is taking away our money... hell! stop it! it is our money on the table being taken away by other people , apply STOP LOSS. Oh ya STOP that LOSSES….CUT…CUT ….CUT fast ha ha ha… cut that losses with a big laugh and reward ourselves if we are able to do it as planned… do it often.. try that until we feel cutting losses jadi macam potong sayor…. Zap zap zap… no questions asked…

There are many ways to define the stop loss positions, and the popular ones are as follows;

1.A fixed % below Entry level , normally around 5-12% below entry level

2.Placing a stop loss position at a few ticks below PIVOT or SUPPORT (below pivot or turning point)/DYNAMIC SUPPORT line (below trendline or Moving Avg line). Normally around 3-7 ticks below the support/dynamic support lines. It has to be deep enough to avoid noises

see this video on the right way to place a stoploss position
http://www.yourtradingcoach.com/Videos-Risk-Management/Tight-Stops.html

an example of stop loss placement when you are trading breakouts
http://www.youtube.com/YourTradingCoach#p/u/11/6YZ4ORz-UJ0

THE STOP LOSS SHOULD BE PLACED IN A POSITION WHICH INVALIDATES THE SET UP
http://www.yourtradingcoach.com/Articles-Risk-Management/Tight-Stops.html

NB: need to be cautious as market maker are fully aware of our stop loss positions and may test our nerves via ‘shaking out activities’ before embarking on mark up activities.

EXIT DOOR NO. 2: when the market is moving in our favour - we are in profit and happily riding OPM (other people money), oh ya … OPM.. because when we raised our trailing stop above the entry level…we are practically removing our money from the table- no more risk - we are just riding the profit - riding OPM ha ha ha…. Ride it until we reach our predefined EXIT doors as listed below.

1. FIXED TARGETS: at a Predetermined Price or reaching a predetermined ‘resistance’ line or upper channel line or fixed % gain . The popular fixed % gain are < 10% for a short term player (normally 3-5 days move) and > 20% for mid- term players (normally > 1 week move, sometime have to wait up to 6 months), but ok lorrrr it is worth waiting for, 20% in six month means 40% gain on annualised basis, - for people like me, a gain of 20% pa is good enough larrr.

2. CANDLE REVERSALS PATTERNS: normaly applied to a FAST UPTREND MOVES, (3 days to 2 weeks move where the price moved in parabolic shaped or price move >20% above moving avg line or the trend angle > 60%). Candle reversal patterns include: bearish engulfing, dark cloud cover, shooting star and even hanging man, dogi and tweezer at top of an uptrend. Some using CANDLE TRAILLING STOPS like the breaking of yesterday low or 2 candles low.

3. TRAILLING STOPS: fixed % retracement from recent high, normally around 5% from recent high.

4. TRAILLING STOPS: Most popular ones are violation of TRENDLINE, Moving Avg or Exponential Avg lines (DEAD CROSS) and even violation of Bollinger Band mid line. The classic trailling stop used by professional are the volatility trailling stop like ATR (avg true range ) used on either weekly or daily bars. The comman parameters used to define the trailling stop is between 2 to 4 x ATR.

5. BEARISH REVERSAL PATTERNS:Longer term traders will likely use chart patterns to exit. These include;break of Double/Triple top neck line, lower high 1-2-3 formation, break of head&shoulder neck line, breakdown of ascending wedge, xxxxx days (normally 10 to 20 days) channel or rounded top breakdown.

Huh huh huh I saw my bedroom Door opens ….its Time for bed…lighst off Happy trading
KNOW HOW TO ENTER AND HOW TO EXIT BEFORE TAKING A TRADE.....hey I said 'taking a trade'...not anything else...you dirty mind... ha ha ha....ooops! wanna hear a story on similarity between trading and sex ? wait for the next episode...he he he.

watch this video for better understanding on the importance of EXITS, and the various EXIT strategies

http://www.yourtradingcoach.com/Videos-Risk-Management/The-Importance-of-Exit-Strategy-Vid-1.html