Forex Trading Blog

In our opinion exits are much more important, rather than inputs though the majority of beginning traders spend the most part of time in search of ideal strategy of an input as though it can solve their problems.

During one of seminars we spent game in which all were included into the market simultaneously and then carried out own strategy of an exit as changes of the prices. After about 10 fast rounds of trading results usually varied from one extreme value to another. Some traders have got the big profit, and others have incurred heavy losses, the majority was in the middle. Very seldom happened, that two traders had identical result. The purpose of this simple game was to show effect of exits on our results. All people had an identical input, however the results varied from considerable profits to substantial loses.

The same is true and for the present trade. Exits define results of our trade and have much more greater value than something else. Yes, exits even are more important rather than management of the capital (the size of positions). Any best strategy of management by the capital is not capable to transform unprofitable system in profitable, but even little changes into strategy of exits is a way to work wonders.

Some years ago, when we only have started to test our first indicators, we have found out that even the insignificant variation of strategy of the exit used in system, influences quantity of transactions, a parity of profitable and unprofitable transactions, the maximum losses and the general profitableness. We tried to test forex enters, but have quickly found out that actually we test exits as actually changes of enters very slightly changed results of system.

We have started to divide testing of market enters and testing of exits. Now we test strategy of enters, defining only quantity of profitable transactions after an exit through the fixed number of bars. This method of testing of enters is based on our conclusion that the unique purpose of enter is transactions in a correct direction.

Everything that occurs after that has no any relation to the market enters as the transaction outcome is in hands of our strategy of an exit. We want, that our enters had only one purpose transactions in a correct direction so early as it only possible, and this function is easy to measure. The above percent of profitable transactions on an exit through the fixed quantity of bars, the better enter is. But how to measure efficiency of an exit? How to define, what exit is better? What is the good exit? What is the bad exit?

For the purpose quantitative comparison of various exits we have created Exit Efficiency Ratio (an indicator of efficiency of an exit). To begin with it is necessary to have the data about profitable transactions and quantity of bars in them from an input to an exit. For example, let suppose that that we have made the profitable transaction which lasted 12 bars from an input to an exit and has made for us the general profit at a rate of $1500.

The following step consists in that we go to a point of an enter and we count from it 24 bars after it. Our theoretical period of deduction of a position is twice more than the real. Then we visually find the best possible way out in this 24-day period. Do not hesitate, choose really most good exit and calculate the general profit for this exit. We will assume that in our case at an exit in the highest point the profit would make $2500.

People who took the decision to participate in forex trading must start from learning the basics of this market to make sure you do not have problems with this industry.

There is another option – you can hire professional traders to managed your trading account – read more about forex investment here. Also make sure to look for the knowledge in a good forex book.