Quick Tip: Novel Exits Part 2

Yesterday I shared the idea that a good exit may be an opposing signal from a different strategy that you use and know has edge. Reprinted here in italics. 

Let’s say you’re profitably long using a trend strategy and your reversal strategy is signaling short. You have choices, which is better than none.

1. Ignore the reversal signal. 

2. Exit your entire position.

3. Scale out of your position.

Scaling out is a good choice. You’re banking profit and staying in the primary trend. The key is selecting the strategies you’re using. They all need "edge." 

One of our trading team members offered further choices that expand this, and I wanted to share them with you while the idea is fresh in your mind. 

4. Exit (or scale out) at the reversal signal, anticipating re-entering wholly or partially on a pullback. After all, you expect a reaction to the reversal...

Quick Tip: Novel Exits

All the money is made or lost in the exit. Significant research, documentation and review is essential to finding what works best for your style. 

One exit we find productive in our trading room is a counter signal from a different strategy.

Let’s say you’re profitably long using a trend strategy and your reversal strategy is signaling short. You have choices, which is better than none.

1. Ignore the reversal signal. 

2. Exit your entire position.

3. Scale out of your position.

Scaling out is a good choice. You’re banking profit and staying in the primary trend. The key is selecting the strategies you’re using. They all need "edge." 

Join us today, December 1st @ 12:30 PM for a live real money trading demo where we’ll show you how this flexible exit alternative works. Click here to register. 

Wednesday’s Best S&P...

Tuesday’s Results: Neither suggested level triggered.

Quick Tip: Proactive Waiting

Plenty of time in trading is spent waiting. Waiting for a setup, waiting for an economic release, waiting for a profit target. Lots of waiting.

Here’s how to make this “downtime” productive: Get proactive. Get in the habit of asking “What if…?” questions. Answer them. In doing so you’ll be making decisions in advance and be able to act on the spot. No wondering, guessing, procrastinating or flat-out missing the trade. You’ve committed with foresight.

Here's a simple example: Price is slowly moving sideways. Your entry price to buy is far enough away that you don’t expect to see it trigger soon. Suddenly price plunges. The speed candle down is looking powerful.

Now is the time to anticipate, be proactive. Will it continue or reverse? Do you see any other chart features that could stall it? Accelerate it? What are the likely outcomes?

1. Slam...

Subject: Whipping fear.

You know that a confident trader is a winning trader, and a fearful trader is a losing trader. Part of your personal development plan should be eliminating your fears. Yes, fears. Plural. You can have more than one. Over the years teaching traders I’ve noticed different types of fear.

1. The most obvious is fear of loss. Managing your risk, pre-determining your “risk number” (the amount that negatively affects you either financially or psychologically) is the simple answer. Everyone can do this.
2. Fear of being wrong. This is a huge problem with traders and not so obvious. Look back to grade school. The teacher asked the class a question and only a few hands were raised. Not yours. Did you not know the answer? Or were you scared to be wrong in front of your friends? Fear of being wrong paralyzes some traders even when their risk number doesn’t.
3. Fear of not being in control. We all know people who are most comfortable when in control. They...

By Dr. Woody Johnson

Paulo breathed a heavy sigh as he thought about the next day’s preparation.  He was still attempting to recover from today’s session, which was emotionally whipping him as my grandfather used to say, “…like he stole something!”  He felt fragmented and frustrated. He knew that his research and preparation for tomorrow’s trading was crucial.  Paulo also knew that his state of mind was not conducive to the sharp focus of his A-Game, which was required for preparation that was not distorted by poor judgment or distracted by noisy thinking. 

He had several mental/emotional tools that he could use when his emotional temperature was too extreme for making prudent decisions.  But he was so disgusted with his results from this day’s trading, which included several losses, two rule violations and a premature exit that left him at break-even only to watch the price action move decidedly in his direction...