The Entry Vs The Exit

Filed under: Learn Forex Trading |

 

Screen shot 2013-05-16 at 10.44.02Many beginners to trading the forex markets tend to get obsessed with their entry and exit in the market – and rightly so. However, studies have been done to show that the exit is perhaps not as important as one might think. For example, Curtis Faith (one of the famous ‘turtle traders) did a study on time-based exits (exiting no matter what at a set time from the entry) and found that these relatively random exits were even more profitable than a more strategic exit. Thus, he concluded that the entry could account for the entire profitability of a trading system – providing of course that this entry has a significant edge.

 

With this in mind, it is probably not a good idea to get too hung up on your exits, and in watching a trade every second of its life. However, it does make sense to give your trades the best possible chance of making the most possible profit, and as such, I suggest monitoring your trades at the end of each session (when each candlestick closes), and make a decision based upon what price action is telling you. Thus, if you are in a short trade, and a bullish engulfing pattern forms, then you could either exit the trade or move stops up.

 

With regards to your entry, this is perhaps where most of you focus should be, as this is where most of your edge will come from. Personally, I like to find price action signals confirming a trend, or even better, at a significant area of support/resistance. However, there are many strategies for entering the market, and as everyone has a different personality and conform zone, then you will have to find a method that suits your own individual personality. This is something that many beginners fail to grasp – that there is not one way of trading that fits all – but that it is very much dependent on your personality.

One Response to The Entry Vs The Exit

  1. There are also studies done whith random entries which purport to show that the exit is more important than the entry. After all there are both successful and unsuccessful traders in the market at any one time, and all they need for success is to get a profitable exit (on a trade weighted average basis).

    Personally after 5 years of trading Forex, I think that they are both as important as each other. As shown by the fact that it is easy to have profitable trade if one has a superb entry. Just as a superb exit will maximise profit or minimise loss.

    Ian Foster
    May 21, 2013 at 4:02 pm
    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>