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One of
the most overlooked but important parts
of a trade is to determine your Exit
strategies before entering the trade.
Not only will this help maximize the
profits that you may earn but proper
Exit considerations may influence as to
whether the trade should be entered at
all!
For instance, if your target is a 10%
profit, does it make sense to enter a
trade if the entry price is within 5% of
a recent significant high? Since highs
or pivot points tend to become
resistance levels, you may not want to
enter a trade if there isn't sufficient
room before a resistance point is hit.
Conversely, if a significant low is now
far away, then a meaningful stop loss
can be set at or below the support line
made by the low. With TC-Companion, you
can test your exit strategies to
determine the most effective
combinations that work for your
situation.
What type of Exit or Exits make the best
sense to work in conjunction with the
Setup and Entry conditions portion of
the Strategy that you are considering?
Approaches include:
- Using Oscillators
and other Technical Analysis (TA)
tools. Examples would include
Stochastics, Moving Average
Crossovers, RSI, ADX, etc.
- Exit after a goal
has been reached. An example might
be a 10% gain or reaching of a
resistance line
- Using a trailing
stop that moves up as the trade
moves in your favor. TC-Companion
supports several types.
- Picking a stop
loss or maximum loss that you are
willing to take with this trade has
occurred. An example that the stock
has moved 8% below your entry price.
Exits
in TC-Companion (TCC) are written
similar to Setup and Entry Personal
Criteria Formula except that there are
additional parameters that can be tested
including Entry price, known as ENT in
TCC and days in trade abbreviated to
DIN. You can set an unlimited number of
exits within your strategy, but any exit
testing true is sufficient to close the
trade. An example of an 8% stop loss
exiting immediately (in the middle of
the day without waiting for market
close) would be:
A formula for exiting with a 10% profit
would be:
With TC-Companion, you have the option
of seeing how your exits look on a chart
as you are running a backtest. Here is a
sample trade with the 8% stoploss and
10% profit shown for a specific trade.
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