Question:
Hello,
Thank you very much for your reply, I’m very clear on questions 1 and 3 now.
The only issue I have is still question #2.
My biggest problem is that I tend to “overstay” in my trades. As one of Sam Seiden’s OTA’s former students, I’ve been taught to look for opposing zone and exit there.
90% of my trades would look like this: I get in the trade, market starts to move into my direction, I’ll be profitable, say, 30-50 pips, the opposing zone is 100-200 pips away but then all of a sudden market will reverse and erase all my profits, leaving my frustrated as I didn’t lock in any of the profit.
A good example would be my EURAUD short last Friday: at some point in time I was up 80 pips, opposing zone was almost 150 pips below so I decided to leave the trade open and it gapped 125 pips against my initial entry and closed at loss.
I do understand that I should not leave the trade open on the weekend as there were elections coming, but nevertheless it’s a good example where a good, profitable trade would become a loser just because I struggle to find an exit point.
This is my major holdback in trading as I don’t understand when and I why I should be exiting the market.
My brain has being wired by OTA to look for opposing zone but it doesn’t work well for me.
I’d really appreciate if you could help to rectify the exit strategy because I’m trying to get an understanding how banks trade and it looks like my perception of reality is a bit “off” 😉
From what you wrote below I should either wait for the momentum to stall (consolidation) or reverse.
My understand of the consolidation part is that market needs to stuck in a channel for quite significant amount of bars (>10?).
Am I correct?
With reversals, we are talking about reversals against our entry and when you see those it means that you already lost a lot of profit, is that right? So, my question is – how can you anticipate those and what’s significant reversal to you? (30% of the move? 50%? Etc?)
Is there a typical excepted run for each TF?
Obviously when banks are entering trades they are not doing it for 10-20 pips, they need to take much bigger profit for the trade to be worthy of their time.
Out of your experience, on average, what the typical run for m5/H1/D1 in pips?
I do like the concept of the “lifetime” of a zone (24-30 bars for H1/D1) that you brought in, it makes perfect sense. However it also mean that there will be a lot of instances where you don’t have a “LIVE” opposing zone, so how do you trade those? What are you targets based of in such cases?
I guess this is a part of the question above, will there be instances where you’ll enter the trade without knowing your exit point and just let it rolls until you see the signs or exhaustion/reversal or you always have a target of some sort?
Last question: do you think those rules apply to just majors or all of the currencies?
I’m in Australia and would like to try intra-day trading of AUDJPY, AUDNZD and NZDJPY. Do you think it is a good idea or liquidity if too thin on those and I’d stick to the majors instead?
Thank you very much for your help, I do appreciate it a lot!
With best regards…
Response:
Exiting trades is, without a doubt, one of the most difficult things to get right as a trader. I definitely think that targeting zones 100 or 200 pips away is a bad idea without at least taking some profits off during the move towards the zone.
I’ve left my responses to your questions below; hopefully, they help you out a little more…
Q1.
If you’re in a trade and you see a consolidation begin to form… I’d say to take some profits off your trade, or at the very least move your stop to break even.
I can’t definitively say how much profit you’d need to take off… because it all depends on where you entered and where the consolidation formed. However, I wouldn’t close my position upon seeing a consolidation form, unless some large movement against my position took place shortly after…
Q2.
It’s not really a reversal I’m talking about here…
What I’m saying is, if you see a steep movement (a movement consisting mainly of large candlesticks) against your position, it’s usually best to close it. Why? Because sharp movements are most often a signal a reversal is in the process of developing, or a large retracement is beginning.
Hence, closing your trade or at least taking significant profits is usually the best option upon seeing the steep movement against your position…
Q3.
Unfortunately, I can’t answer this without conducting a significant amount of research. I’m not sure it would even be possible to give you an average, to be honest – there are just too many different variables in play which could affect the size of the run.
I’ll have a think about it and see if I can figure out a way to come up with a way to measure the size…
Q4.
If there are no valid zones available, I’ll just look for the most recent point where the bank traders have got a large number of their trades placed, or the nearest big round number level.
If the market is going to reverse, it’ll do so when it’s in close proximity to a round number/psychological level e.g., a price ending in 000 or 0000.
Q5.
Yes, most of the trades I enter to catch significant reversals won’t have an exit point when I enter. I’ll simply watch for signs a large, sudden move against my position is going to take place, or a complete reversal is going to occur, in order to exit.
If I start to see multiple swings take place—with either their highs or lows forming at similar prices to one another—that, to me, would be a signal a potential reversal is underway. At that point, I would take profits or adjust stops accordingly, depending on the price action seen thereafter.
Q6.
When it comes to AUD/JPY – AUD/NZD – NZD/JPY, I’m not really sure to be honest, I’ve never really traded them.
The problem you’ll face intra-day is the spread will be bigger due to the lack of liquidity.
This might not be much of a problem if you’re taking long-term positions, as a precise entry doesn’t matter as much. However, trading intra-day means getting entered at the exact price you wanted could be quite a big issue for you.
At the end of the day… well, it’s up to you.
I personally just stick to trading AUD/USD – USD/JPY and EUR/USD, and they do seem to do me fine. So, it really just comes down to personal preference.
Hope this helps…
PAN.