Entry and exit skills

Entry and exit skills

In an interview for "Millionaire Trader: How the Common Man Beats Wall Street," Bob Booker used a great metaphor. We talked about whether the entry or exit of the trade was more important. Bob compared trading to flying, saying the question was like asking the pilot whether takeoff or landing is more important. I don't think we even need to ask the pilot, as passengers, we all have entry and exit skills

In an interview for "Millionaire Trader: How the Common Man Beats Wall Street," Bob Booker used a great metaphor. We talked about whether the entry or exit of the trade was more important. Bob compared trading to flying, saying the question was like asking the pilot whether takeoffs were more important or landings. I don't think we even need to ask the pilot, as passengers, we all assume that takeoffs and landings require the same level of precision. The same is true for trading.

Most foreign exchange traders spend a lot of time looking for the best entry strategy, mainly by looking for a perfect superposition of all the indicators that send buy signals, while their exit strategy is often left to an afterthought. However, this "afterthought" is often the difference between traders who can consistently make profits and those who are always looking for a better trading strategy. I often hear traders complain about how they turn profit orders into loss orders.

When hedge fund managers design their trading strategies, they spend as much effort on entry and exit. There are four main ways to enter or exit.

1. Single entry point, single exit point: With only a single entry point and a single exit point, a trader establishes an entire position at one price and then closes the entire position at one price.

2. Single entry point, multiple exit points: This means that the trader also builds the entire position at one price, but finally positions squaring at different price points. This strategy is usually used to continuously cash in profits while catching a breakout or trend for as long as possible.

3. Multiple entry points, single exit point: It means that the trader builds positions at different price points in batches, and finally exits at one price position squaring. This strategy is mainly adopted by traders who "spread down" and "spread up". "Squaring down" is when the price is moving in the opposite direction to your desired direction, but it may give you a better average entry price. "Squaring up" is when the price is moving in the direction you expect, adding a position.

4. Multiple entry points, multiple exit points: This means that forex traders enter and exit in batches. This strategy is often adopted by trend traders. They build positions "up" by adding positions on successful trades, and then position squaring in batches to profit as much as possible from the trend.

With an automated trading system, the entry and exit strategies are fixed and programmed as a system. Traders should try to obtain entry and exit points in the same way by deciding which of the first four strategies to use before entering a trade. For those who prefer "up" or "down", one important question is how high or low you are willing to buy. If you keep adding to losing positions, there is a chance that at some point you will be miserable. At that point, it would be wiser to bite the bullet, cash in on losses and admit that the volatility you initially hoped for did not materialize or that the trend has changed. A rule of thumb is to "amortize" the position no more than three times. There should be no trick to stop losses - find a fixed rule for setting stops and stick to it.