Scaling Out: Ringing the Register

I would like to hear your thoughts on exit strategies. I have a strict rule on all my exits in intraday trading.

I look to scale out half of my position as soon as the Dow gives me +10 (approx 1pt on the emini S&P) and scale out another quarter at +20. The final quarter is where I try to make my money and I consider it luxury.

Some of you may have different rules for exits or targets. Do you prefer to scale out at specified target? Are youre exits all discretionary, based on indicator signals, pivots, or based on a fixed amount of points/dollars?

For any new futures trader, I usually recommend them to trade a minimum of two contracts. Most people would recommend one. But from a psychological point of view, missing out is worse than being stopped out. A 1-lot trader is forced to cash out alot more quickly than a trader that trades multiple lots.

This is why I recommend a new trader to begin with at least 2 lots. The first lot is to simply eliminate risk (yes.... sounds ironic). The second lot is to make profits.

Any thoughts on this?

Soultrader

For me, it's a combo of trailing stops and pivot points for targets- if the trade is going well enough to hold some, hold em all I think. It may mean a lower win rate, and slightly more volatile equity curve, but it means I'm holding bigger size during the trades that turn into big winners.

soultrader said:

For any new futures trader, I usually recommend them to trade a minimum of two contracts. Most people would recommend one. But from a psychological point of view, missing out is worse than being stopped out. A 1-lot trader is forced to cash out alot more quickly than a trader that trades multiple lots.

This is why I recommend a new trader to begin with at least 2 lots. The first lot is to simply eliminate risk (yes.... sounds ironic). The second lot is to make profits.

Any thoughts on this?

Soultrader

Click to expand...

I just don't get it ? ( your words : The first lot is to simply eliminate risk ).

Cheers Bob.

Bobby said:

I just don't get it ? ( your words : The first lot is to simply eliminate risk ).

Cheers Bob.

Click to expand...

Bob,

It works like this.

Enter the trade with more than 1 contract... let's say 3 contracts so we can extend the example... and lets say we go long at 10,000 with the following parameters.

Stop loss @ 9,990
1st target @ 10,010
2nd target @ 10,020

So if you enter the trade and it immediately goes against you, you are stopped out on all three contracts.

But If it goes in the direction anticipated, 1 contract is sold at the 1st target and the stop on the other two is brought up to break even. So now we have a risk free trade. The 10 points profit on the 1st contract will pay the commission costs on the other two if stopped at break even, plus a few dollars.

This is what James is refering to when the first lot is to eliminate risk.

Another lot is taken of at the 2nd target and the stopp moved up again. Now we have a certain profit locked in.

The last lot is a runner, that you can have a trailing stop on, oe exit discretionarily (say at a divergence, pivot, 3rd target or something like that)

Clear as mud?

wayneL said:

Bob,

It works like this.

Enter the trade with more than 1 contract... let's say 3 contracts so we can extend the example... and lets say we go long at 10,000 with the following parameters.

Stop loss @ 9,990
1st target @ 10,010
2nd target @ 10,020

So if you enter the trade and it immediately goes against you, you are stopped out on all three contracts.

But If it goes in the direction anticipated, 1 contract is sold at the 1st target and the stop on the other two is brought up to break even. So now we have a risk free trade. The 10 points profit on the 1st contract will pay the commission costs on the other two if stopped at break even, plus a few dollars.

This is what James is refering to when the first lot is to eliminate risk.

Another lot is taken of at the 2nd target and the stopp moved up again. Now we have a certain profit locked in.

The last lot is a runner, that you can have a trailing stop on, oe exit discretionarily (say at a divergence, pivot, 3rd target or something like that)

Clear as mud?

Click to expand...

Thanks Wayne, now I understand what James was getting at,
nice elucidation by you .

Regards Bob.

Bobby said:

Thanks Wayne, now I understand what James was getting at,
nice elucidation by you .

Regards Bob.

Click to expand...

Yes I agree. Good elucidating WayneL!

thanks for clarifying it up WayneL.