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Trade Plan: Exiting with Precision and Safety
Last Activity 6/10/2024 6:56 AM
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Frank Birch

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Subject : Trade Plan: Exiting with Precision and Safety
Posted : 9/17/2023 4:52 AM
Post #32294

Hi to all,

This Trade Plan isn't about moving with the masses; it's about strategically positioning ourselves to capitalize on market shifts. Rather than merely reacting to market trends, we focus on anticipating their next moves, ensuring we execute at the opportune moment for maximum gain.

Exits in trading: Many might consider it a yawn-inducing topic, but I'd argue that it's the unsung hero of any successful trading strategy. When crafting a new trading concept, I don’t just dive straight into the entries; I start with the exit methodology. If you ask me, the bigger picture in trading isn’t about making a grand entry but knowing precisely when to bow out.

1. Dual Fixed Loss Stops:
The concept of having two fixed loss stops might seem peculiar at first, but there's a method to the madness.

Vote Line Stop (4 ATRs): This is the primary stop that's tethered to our trading system. If the trade goes against us by a distance of 4 Average True Ranges (ATRs), we exit, protecting our capital from more significant losses.

Broker's Emergency Stop (5 ATRs): This stop is sent directly to the broker upon entering the trade. Its primary function is to serve as a safety net. In the rare instance where we lose connection or face other technical difficulties, this stop, being 99% guaranteed, ensures our exit, preventing potential catastrophic losses. A crucial detail I've learned, thanks to Barry Cohen, is the importance of naming this stop. Without a proper designation, there can be issues with its proper execution.

2. Breakeven Stop:
Pause and ponder this for a moment. A breakeven stop isn't just about ensuring zero loss. Its core purpose in our system is to cover slippage and commissions. If a signal doesn't pan out the way we anticipate, the least we can do is cover the cost of doing business, ensuring that we're not paying out of our pocket for a misstep.

3. Trailing Profit Stop:
Once a trade moves past the breakeven point and starts venturing into profitable territory, this is where the trailing profit stop comes into play. As the market continues in our favor, this stop trails behind, locking in profits along the way. And if the market decides to make a U-turn? This stop ensures that we capture the gains and exit before they evaporate.

Order Type:
All orders in this plan are placed as Market Orders. This approach is crucial for real-time trading, ensuring timely entries and exits without unnecessary delays.

In summary, trading isn't just about glamorous entries or the thrill of jumping into a potential profit pool. It's about a meticulous, well-thought-out exit strategy. Because, at the end of the day, anyone can enter the market; the true test of a trader's mettle is knowing when to make a graceful exit.

In the grand tapestry of trading, while many are lured by the siren call of making the perfect entry, the real magicians are those who've mastered the art of exit. It's one thing to join the dance of the market; it's another to know the perfect moment to take a bow, leaving the stage with grace and profits in tow.

For those eager to put this trade plan to the test, please find attached the SysTrade RT TP. Dive in, test it out, and most importantly, enjoy the trading journey it brings you on.

Regards,
Frank Birch
Attached file : 17-Sep-23 09-40-27 fixed loss stop.png (240KB - 58 downloads)
Attached file : 17-Sep-23 09-41-09 broker fixed loss stop.png (240KB - 48 downloads)
Attached file : SysTrade RT TP.ott (96KB - 56 downloads)

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mholstius

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Subject : RE: Trade Plan: Exiting with Precision and Safety
Posted : 9/17/2023 6:52 AM
Post #32295 - In reply to #32294

Another excellent post, Frank!

You state:
"A crucial detail I've learned, thanks to Barry Cohen, is the importance of naming this stop. Without a proper designation, there can be issues with its proper execution."

Can you explain what you mean by "naming" and "proper designation"?

Thanks for your time,
Mark
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Frank Birch

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Subject : RE: Trade Plan: Exiting with Precision and Safety
Posted : 9/17/2023 8:26 AM
Post #32296 - In reply to #32295

Hi Mark & all,

Thanks for reaching out. I appreciate your keen observation and your question, which gives me the opportunity to clarify this for everyone.

When I mentioned the term "naming" or giving the stop a "proper designation," I was emphasizing the importance of clearly identifying and labeling the specific exit strategy in our trade plan. Let me break it down.

In our trade plan, we often use virtual stops, which are essentially algorithmic determinations of where a stop should be, based on parameters like ATRs. For the broker's emergency exit, we usually designate it as a virtual stop set X ATRs away, often referred to as the "Broker stop."

However, if you don't distinctly name or label this "Broker stop," the system (or the vote line, as we refer to it) gets confused. Why? Because the vote line tends to pick the unnamed (or ambiguously named) stop over the primary fixed loss stop that we intend to be hit first. This mismatch is where the crux of the problem lies.

In essence, any trade plan within your list that possesses an unnamed virtual stop is susceptible to this discrepancy. While it might not pose a significant issue in end-of-day trading scenarios, it certainly does in real-time trading. The end result? Your vote line results don't align with your Back Testing (BT) or Forward Testing (FT) outcomes, and there's a further discrepancy when comparing your broker's results to your vote line. It’s like trying to match two pictures, but one has a filter that slightly changes its appearance – they won’t align perfectly.

To sum it up: By not giving a specific name or designation to the virtual broker stop, it's like giving two separate roles in a play the same character name. The director (or our trade plan, in this case) gets confused on which role to call to the stage first, leading to a disrupted performance.

Mark, can you please share how you add pictures to the actual post without attaching them at the bottom?

Hope that clears things up, Mark. Feel free to reach out with any further queries.

Regards,
Frank Birch
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Frank Birch

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Subject : RE: Trade Plan: Exiting with Precision and Safety
Posted : 9/17/2023 8:33 AM
Post #32297 - In reply to #32296

Hello Everyone,

I wanted to share a link that initially prompted me to delve deeper into the intricacies of the vote line. If you navigate to the conclusion of the discussion, it provides clarity on the adjustments we had to make, especially the importance of naming the broker stop.

https://www.omnitrader.com/currentclients/proforum/thread-view.asp?threadid=8086



Best wishes,

Frank Birch

[Edited by Frank Birch on 9/17/2023 8:35 AM]

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mholstius

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Subject : RE: Trade Plan: Exiting with Precision and Safety
Posted : 9/17/2023 3:25 PM
Post #32300 - In reply to #32296

Hi Frank...
I've attached (and included in this post) how to insert an image in a post.
You still have to attach it to the post, but this is how to insert it in the body of your post;



Mark


[Edited by mholstius on 9/17/2023 3:27 PM]

Attached file : Inserting images.jpg (663KB - 146 downloads)

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Frank Birch

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Subject : RE: Trade Plan: Exiting with Precision and Safety
Posted : 9/18/2023 3:34 AM
Post #32302 - In reply to #32294

Hi Mark & all,

Learn some thing every day outstanding work as ever and thank you!

Regards

Frank
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