Hi fellow ALSI traders, I need some advice here. I am getting into good trades, ie my entry points into the trade is sound, but I am having trouble with my exits. I buy at the right moment, watch the profit grow, and then see the profit decrease untill my stop kicks in. Am I trying to hard to get 'THE BIG MOVE' or should I be happy with 50-100 points and get out of Dodge? Trailing stops will be my next exit strategy, but in the past I've been stopped out before the ALSI rocketed, maybe not perfect but safe and sustainable? Your thought on the matter Ladies and Gents.
I'm trading a very simple system, as presented by Simon at the Index trading presentation. Time frame, exit before 5PM System 1 If the market gaps up, I short it, gaps down go long. System 2 Engulfing candle, longs if the 7 SMA is over the 21 SMA and vice versea System 3 7 SMA crosses the 21 SMA on the Top40 chart. Stop loss 50-100 points All on 15 min candles Nice and simple, bugger is to walk away from the pc if nothing is happening!
How many contracts? If you trading 2 or more contracts, take profit at 50 points and second profit at 150 points. Or profit at 100 points and 200 points.And move your stop loss in your direction to breakeven for the last contract to run. But, as I posted before, when I figure the EXIT, I will do this full time!
Untill I have a better success rate I am sticking to 1 contract. Is started off with the smaller ALMI contracts, but there is no liquidity with the result the market just runs past your stoploss without selling. I know a lot has been said about risk/reward ratio, and I was thinking that if I am risking 50 points I should take profit at 100 points, or at least move the stoploss up to that point. I agree with selling some contracts earlier on and leaving the rest to run with a trailing stoploss, will have to move up to multiple contracts to do that though.
You are dealing with the hardest problem of all in trading, when to take profits. There are several strategies, again the key is consistency. One strategy is just to take profit - but this is not recommended, because you might not get another entry for half a year if we have a good rally, and you will just sit on the sidelines whatching how much money you could have made. Another is the phased approach - sell 1/3rd at first target, 2/3rds at second target,and let the rest run. I personally don't like this, but it is sound. Another approach is the chandelier stop or the SARS. you will see a lot of profits leave the table, but then you will also hit the odd really big trade, and this is where proponents of this technique make their money. Personally, I work on a system where I take an average of 6 trades a month on 6 different stocks, if the entry is right. I aim to let the strongest 2 ride, and take profits on the rest. My goal is to build up a safe level of geared exposure. Once I am 10 to 1 geared on my total portfolio(never reached this level), then every 10% move on my portfolio will double my money - this is my goal.