Hard Right? Edge on exits

Posted on September 27, 2005
Tags: Trading Plan |

While looking up and reading more about exits I came across the following article on Hard Right Edge, Alan Farley’s website. I usually enjoy reading his setups and analysis articles and think there’s a lot of good material posted there so this one on exits was quite intriguing, and this caught my eye:

Take the time to examine support and resistance, and then guess where the crowd will take action. Over time you’ll become an expert in picking market turning points. Start by asking yourself this common-sense question: Where will other traders get too scared or greedy, and want to jump ship?

From Mastering the art of the exit.

What jumped out to me immediately was picking market turning points. This seems to be in contrast to conventional thought that it’s futile to predict tops and bottoms and it’s better to go with trends, ride them and let the market take you out. On the other hand, I’ve seen many times how good positions I was holding with a nice profit cushion turned into either break even trades or losers. My personal conclusion to this predicament is that the exit method one chooses would depend on the particular strategy being employed and also on personal trading style. Determining what works for you in your trading is probably more important than just following one rule of thumb or another. I also find it imortant to remind myself that no matter how well I devise my strategy this is not a game of a single right and wrong answers that works every single time. As the article title implies, exits are more of an art and I would add, also guesswork and (horror!) luck.