The Consistent Trader: How to Build a Winning Trading System, Master Your Psychology, and Earn Consistent Profits in the Forex Market by Eder Sam

Author:Eder, Sam [Eder, Sam]
Language: eng
Format: epub
Publisher: TCK Publishing
Published: 2017-02-10T16:00:00+00:00

An exit rule in case of reversal right after entry

An exit rule for an intra-trade drawdown

An exit rule if the trade moves steadily in your favor and then reverses

An exit rule for a fast-moving market in your favor

An exit rule for a fast-moving market against you

An exit rule for once the price gets close to your profit objective and starts to fall away

An exit rule for chart patterns that signal reversals

An exit rule if fundamental or sentiment conditions change .

Simple Entries Vs. Complex Exits

In chapter 10, we learned that your actual rule for getting into the trade should be simple. Complexity is the enemy of decisiveness. Why, then, am I saying you should have a complex exit strategy?

Each component of your exit strategy on its own is quite simple, yet when combined, they form a complex exit strategy. Contrary to the popular wisdom that a simple trading plan is better, exits need to be able to cater to many different circumstances. Ideally, you want to have a set of clear rules that will allow you to manage risk and protect your profits, depending on what the market does.

The Market Is Going to Force You to Make Decisions

Throughout your trade, the market is going to throw you all sorts of different scenarios. It is going to force you to make decisions about what to do constantly. Often, it will be best to sit tight and do nothing, but there will be times when you should take action. At each of these “decision points”, your complex exit strategy comes into play.

You will need to assess the current market, and apply the right tool for the job to manage your trade properly. A decision point could arise because of market action, or it could arise because a pre-planned price was hit. A reversal pattern could form, or the price could reverse a number of R-multiples, and you need to decide if you are going to stay in the trade, or if it’s time to exit or reduce your position size. Be aware that these decision points are going to happen, and be ready to act when they do. Trading what’s in front of you is all about being prepared .

Learn to Expect What Comes Next, and Play the Probabilities

“Your job is to follow the system. If the system does something that results in losses. That’s just an expected part of the system. Your Judgement might be on the line over the performance of the entire system, but there is no sense in which your judgement is on the line on any single trade.”

~ William Eckhardt

In developing your complex exit strategy, it is important to understand market types. If you know what market type the currency pair is in, then you can predict what might follow. For example, a bull normal market will often transition to a bull volatile and then a volatile sideways phase before falling into a bear market. If you know this is the probable outcome, you can plan your exits accordingly.

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