๐๐ฃ๐ฉ๐ง๐ฎ ๐๐ฃ๐ ๐๐ญ๐๐ฉ ๐๐ฉ๐ง๐๐ฉ๐๐๐๐๐จ - ๐๐ช๐ก๐๐จ ๐ค๐ ๐๐๐ช๐ข๐ ๐๐ฃ๐ ๐พ๐ค๐ข๐ข๐ค๐ฃ ๐๐๐จ๐ฉ๐๐ ๐๐จ (๐๐๐ง๐ฉ 1)
Yesterday I posted a poll. This topic - Entry and Exit Strategies - Got 52% of the vote. Letโs go.
If you want to hear traders talk about their entry and exit strategies, check out chatwithtraders.com/ It's the best podcast around IMO. This article won't outline strategies in detail.
What this article ๐๐๐๐ do is tell you some rules of thumb which I think most traders / investors would benefit from following, and some common mistakes
In a future article I'll outline my own entry / exit strategy in detail (Mine is quite complex involving valuations, RSI and percentage of equity as well as conservative / aggressive buying, so it will take a whole post).
๐๐ช๐ก๐๐จ ๐ค๐ ๐ฉ๐๐ช๐ข๐ (๐๐ฃ๐ ๐๐ค๐ฌ ๐ฅ๐๐ค๐ฅ๐ก๐ ๐๐ง๐๐๐ ๐ฉ๐๐๐ข)
๐น๐๐๐ ๐๐ ๐๐๐๐๐ 1: ๐ป๐๐๐๐ ๐๐๐๐๐ ๐๐๐๐ ๐๐๐๐๐๐๐๐๐, ๐๐๐ ๐๐๐๐ ๐๐๐ ๐๐๐๐ ๐๐๐ ๐๐๐๐ ๐
Etoro is a place where one piece of advice gets repeated a bit too much: ๐๐๐ซ๐๐ง ๐๐ก๐ค๐จ๐ ๐๐ฃ ๐ง๐๐. This is nonsense.
Instead of thinking of individual trades as your children, think of your portfolio as your child.
If your kid tries to learn Karate and comes home with a black eye crying that he hates it, you wonโt tell him to keep going to karate. Youโll cancel it and let him sign up for computer club.
Your child is your portfolio. In this case you closed Karate at a loss and opened computer club. Well done Mrs Gates, Bill did well.
You want to think about how to build profit in your overall portfolio by:
maximising the cumulative wins
and
minimising the cumulative losses
across all trades.
You should be confident that your profits MINUS losses will be greater than zero, long-term. It could be regular small losses and rare big wins.
๐พ๐ค๐ข๐ข๐ค๐ฃ ๐ข๐๐จ๐ฉ๐๐ ๐: ๐พ๐ก๐ค๐จ๐๐ฃ๐ ๐จ๐ข๐๐ก๐ก ๐๐ง๐๐๐ฃ๐จ ๐๐ฃ๐ ๐๐ค๐ก๐๐๐ฃ๐ ๐๐๐ ๐ง๐๐๐จ
Bob doesnโt have a plan, but he knows his favourite colour is green. He makes a lot of trades and he has a 100% record of closing in GREEN. Bob links everyone to his trade history page.
Bob tells everyone that "realised profits are all that matter"
Bob is a bagholder, and his portfolio includes positions at -99% red with no plan of when he'll exit them except hope beyond hope.
Donโt be Bob. Know when to close in a red.
๐๐ช๐ก๐ ๐ค๐ ๐ฉ๐๐ช๐ข๐ 2: ๐๐๐ซ๐ ๐ ๐๐๐ญ๐๐ ๐๐ฃ๐ ๐ข๐๐๐จ๐ช๐ง๐๐๐ก๐ (๐ข๐ค๐จ๐ฉ๐ก๐ฎ ๐ฃ๐ช๐ข๐๐๐ง๐จ ๐๐๐จ๐๐) ๐๐ฃ๐ฉ๐ง๐ฎ ๐๐ฃ๐ ๐๐ญ๐๐ฉ ๐ฅ๐ก๐๐ฃ
I've heard this again and again from hundreds of successful traders and investorsโฆ BEFORE you enter a trade, you should have a ๐๐๐ผ๐ and know what you will do in ๐๐ก๐ก ๐๐ซ๐๐ฃ๐ฉ๐ช๐๐ก๐๐ฉ๐๐๐จ. You should NOT be going on gut instinct or adaptaing to an unforeseen (but totally predictable) event.
๐พ๐ค๐ข๐ข๐ค๐ฃ ๐ข๐๐จ๐ฉ๐๐ ๐: ๐๐๐ซ๐๐ฃ๐ ๐ฃ๐ค ๐๐ญ๐๐ฉ ๐ฅ๐ก๐๐ฃ
True story: I looked at the historical $BTC chart several years ago and noticed it had dropped 80% a total of 7 or more times, and recovered every time. This was shortly after the $20k peak. I thought to myself, this is a product of mass psychology, despair and impatience, and I bet itโll happen again.
I told myself to buy when it reached $4000.
Bitcoin reached $4000 amidst doom and gloom, tears and blood, and I bought a whole bitcoin. My entry strategy worked perfectly.
The problem was, I had no exit strategy. After a few months, I saw a surge in price. At $6k I was delighted and closed my entire position for 50% profit. Not bad my son, not bloody bad.
I then watched $BTC climb to an eventual high of $65000. Oops.
As hindsight and FOMO wore on I was not happy with my 50% profit. I thought about what could have been. I told myself: ๐๐๐ฑ๐ญ ๐ญ๐ข๐ฆ๐, ๐โ๐ฅ๐ฅ ๐ฌ๐๐๐ฅ๐ ๐จ๐ฎ๐ญ ๐จ๐ ๐ญ๐ก๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง. The problem here is ๐ ๐จ๐๐ค๐ช๐ก๐ ๐๐๐ซ๐ ๐๐ค๐ข๐ ๐ช๐ฅ ๐ฌ๐๐ฉ๐ ๐ฉ๐๐๐จ ๐๐ญ๐๐ฉ ๐ฅ๐ก๐๐ฃ ๐ฝ๐๐๐๐๐ ๐ ๐จ๐ฉ๐๐ง๐ฉ๐๐
Disclaimer: I no longer trade crypto and think the following examples are BAD entry / exit strategies, as I'll show in part 2, when I tell you NOT to base exits on your personal profit/loss.
๐ฝ๐๐๐๐๐ ๐ฎ๐ค๐ช ๐๐ฃ๐ฉ๐๐ง ๐ ๐ฉ๐ง๐๐๐, ๐๐๐๐ ๐ฌ๐๐๐ฉ ๐ฎ๐ค๐ช ๐ฌ๐๐ก๐ก ๐๐ค ๐๐ฃ ๐๐๐๐๐ ๐๐พ๐๐๐ผ๐๐๐.
You should be able to do this in a series of IF THEN statements
E.g. The strategy I followed above turned out to be:
IF it rises 50% THEN close 100%
The strategy I wanted it to be was something like:
IF it rises 50% THEN close 50% of position
THEN IF it rises to a total of X% THEN close Y%, etc.
Of course, you need to decide when to close if it goes down too.
In the next article I'll give some specific suggestions of criteria you can use for your entries and exits, both technical & fundamental.
5000 character limit reached:
Notes for me for next time: More rules of thumb, Psychology, My strategy.
Please like / share!
Part 2: etoro.tw/3Xmzxy5$SPX500$NSDQ100...
