Monday, February 7, 2011

Exiting a swing position

"Profit often, profit early" is a good principle on how to exit your positions. You should always exit one contract at +1, this gives you strength to hold through a pullback to breakeven or slightly below since you wont be fretting over lost profits or fear a good trade turning bad. Exiting additional contracts at +4, +8 and +10 with a stop below the previous swing low is a good practice and is practiced by many price action traders. Today's post represents the top central orange cell labeled 'TTR' in the nine transitions.

Today presented very few low risk entries and the earliest entry was the 1PB at b6. You could hold it till the end of day, but often the market tells you it may not pay to hold till the end of day. Today presented some of these signs that should not be ignored.

A healthy trend prints strong trend bodies. When it can no longer do that and tails and overlaps dominate, you should watch for trend weaknesses such as trendline breaks or climax bars.

The earliest sign was a possible horizontal FF from b14 to b16. The fact that its breakout on b17 failed right away was a sign to exit on strength. The shrinking bodies and growing tails approaching a trendline that has been tested at least four times already signalled a possible trendline break which we got on the move down to b23. Since this was a first trendline break after a sharp move, a test of the HOD was a high probability event. If you entered above b6 today, you could try to exit at 1319.75 giving you +6. The price crossed it by one tick and turned down into a reversal bar.

As I have noted before, an end of an up move does not automatically mean you should reverse your position. Often strong trends give horizontal flags that later break in the direction of the original trend. However, sometimes it breaks in the opposite direction as it did today and the right thing to do is to exit and wait for more price action.


  1. Very nice trade Cad, I suppose after that one you weren't looking for others. However there was a small long which yielded 2.5 P. B69 was a TCL OS at the PRT of b6 high. B71 was a strong reversal bar providing 3 reasons for an entry above. This trade I perceive to be a W from a TCL R.

  2. @RF, I often stop trading at lunch, especially if the lunch hour is sideways