Welcome to my third video devoted to theexit of the strategy, the first video was about indicators, the second video wasabout the entries of the strategy and this time, we're gonna speak about somethingvery important because it's all about money management, we have a very simple goal: we want to cut the losing trades as short as possible and we want to let thewinning trades run as long as possible There is one thing to understandstraightaway this is that the entries are quitestraightforward there are simple rules to follow and ifyou follow all the rules, you can place you pending order however it's a bitdifferent for the exits of the system there is a question of decision-makingwhich are sometimes subjective, most of the time, it will depend of the higher timeframes, of the confidence you will have into the trade when you will see thefirst signal of exit.
We are going to look at first of all the exit who results of the TP so let's see an example, this is the gold/USD onh1, a wonderful trade and we're gonna use the Fib expansions.
The beginning of thewave 3, a the wave 4 and you have here the Target Zone 1 and theTarget zone 2.
As you can see TZ1 is a bit early into the trade, theTZ2 is a perfect exit.
We have also the possibility for the TP, it's to use the BRNs – big round numbers this is an example on AUD/US on h1 this is the entry of the trade, the setup, you can see that thelevel of the box is at the same level that the previous boxes so this is perfect lineof resistance, so you can take the trade here and you are going to exit at theBRN 0.
700 obviously, this is not the full profit thatyou would take but you could at least take 80% of the move.
This is far to be thebest exit but sometimes when you don't want to carry your trade over theweekend at the end of a week, you can use the BRNs; It's also useful atthe end of the day for example the end of the London session.
The initial SL will be another kind of exit in the case which where theprice goes against you.
An example on the USD/JPY h4, let's zoom it you expect the wave 5, the bullish wave 5and you can see that you have an entry, a setup here with this line, youexpect the price to break the upper level of the factor box, the price will triggeryour pending order and then will reverse, mySL, initial SL because this is a sleeping alligator, will be on theother side of the box and unfortunately my SL will be kicked here so I'mlosing 1% if I risk 1% of my capital and you see that after that we can re-enteragain into the trade and this time the price we will move up nicely.
An example nowwith a s2 entry.
This is the s1 entry, sleeping alligator here, I zoom, then theprice doesn't move that much so there is a pullback and you have a second entry, thealligators lines are opening so it's s2 entry, in that case my initialSL will be below the green line this is not an example which where myinitial SL is going to be kicked because the price is going to move upand then is going to pull back and here, when the candle closes below the greenline my SL is kicked but it does show you how itworks.
Please bear in mind that you have always the option, if you are any doubt, to take, for example, half of the profit because you don't want the price toreverse against you but still expect to get more profit so you can always banksome profit, you can also, if you don't believe in the trade and you see that theprice go against you but you didn't have your SL kicked yet, we can always choose to get rid of some of your losses, allright, so for exampleafter losing 0.
5%, you can choose to cut 70 or 80% of your losses.
Also in mystrategy, when you have a setup the situation on the higher time frame is not sogood but you choose to take the setup anyway, the price is going quite well but you don't have a lot of confidence in the highertime frames, you have the option when you profit reaches +1%, to bring yourSL, your initial SL to your entry point so at breakeven, so in thatcase, you sure that you won't lose any money you're already at breakeven.
Ok so let's sum up our programmed exits, I call this that way because these exitsare set or because we have the initial SL who will be kicked or because we haveused and reached or TP through for example, the Fibonacci expansion orthe BRNs let's study now the exits which are notprogrammed not set because of a TP or because the initial SL, those exits are much more flexible and the first case scenario is when theprice is moving very quickly, very fast, we are going to use in that case theCandle Trailing method, so let's see an example, this is an example on the USD/JPY on h1 in February, this is the setup 1, we have a setup 2, the alligator lines are open and then after that break, the price is flying, we cansee some moves who are much faster – this one here, it's going fast, away fromthe green line but still parallel to the green line, sometimes it moves very muchand the green line is very far away.
So the things you don't want to see is abrutal pullback and the strategy consists at put your SL below, because this is a bullish trend, the previous candle so basically youwill move your SL below each candle.
okay and after moving yourSL below this candle, the price is going to reverse and kick yourstop-loss here.
Our profit will be quite nice especially that you mighthave one entry and a second one an add-on, obviously you won't take thefull amount of the movement, the full trade becauseit's going higher but you have always the option to say okay for 50% of thisprofit I will use the Candle trailing and the over 50%, I will let it run, all right?Now we are going to study the exits which are not set, I call them floatingexits or flexible exits because they will evolve as the price evolves as well, thisis an example on the Gold/USD, a little zoom, all right, we have here: sleepingalligator, nice box, this is a setup 1 actually, this is the setup onebecause this is the break of the box and this is our initial SL with thepurple line here, the price is going to move slowly up and then pull back forminghere a new sell fractal.
And one of the strongest exit is the opposite side ofthe fractal box.
Look at this, I'm going to move my SL as soon as we havea new sell fractal, a new lower level of the fractal box and this level keeps meinto the trade, look at this and I'm going to exit when the price is going tocross the lower level or break the lower level of the fractal box and this is myexit here, very nice move.
Second exit is to use the green line or the red line ofthe alligator, I'm going to use the green line when there is a divergencebetween the price and Ewave and the red line when there is no divergence between the price and the Ewave.
I am going to use thesame example GolD/USD, so here we don't have any divergence because thepeak of the wave corresponds to the higher price, no divergence, and here wehave a divergence, we have a higher price but we don't have here a higher peak sobefore that vertical line, I am going to use the red line and you can see thatthe red line keeps me always into the trade.
At that point, there is a divergenceso the green line will be my exit, more exactly when the close of the candlecrosses the green line which is here not before because the close of the candleis above the green line so I'm going to exit here which exactly the same exit ifI use the opposite side of the fractal box as an exit.
Other example now with EUR/USDh1, we have a nice sleeping alligator this is the start of my trade and I amgoing to use different methods, first of all, the opposite side of the fractal boxmethod, this is my initial stop loss and if I move it to each lower level of thefractal box that will be here my exit I have 26 pips initial SL and Ihave a profit of +223 pips which is +9% profit.
If I use now the divergence and the red line, green line method, I have nodivergence at all because the peak corresponds to the higher peak, allright? So I am going to use the red line here there is the price crossing the redline but the close of the candle is above the red line and that will be myexit here as the close of the candle crosses the red line so I will get a few, like maybe 20 pips more, a bit better yeah I will have 1% more sohere my trade is gonna be +10% profit.
Let's check another example USD/JPY H1 h1, this is the moment of the trade, sleeping alligator, the break of the box, setup 1, we have a small putback and then we have asecond entry, s2 because the alligator is starting to open, the price is going downand then, look at this, we have a first signal of exit because we have the pricewhich is breaking the upper level of the fractal box so it is the opposite sideof the box and this is where we can say that the exit are very subjectivebecause it depends a lot of the decision making, if you look at the situation onh4.
Do you want to exit here? This is a start of an impulsive wave, you don'treally want to exit here.
We have 3 options: you can let it run, you can exitor you can bank some profit.
Let's go back to h1, you have a third entry possible here, new break of the box and I have to say that you have tobe very careful with the other side of the box signal because sometime this boxis, like this, bellow the alligator so it's just a pullback.
however, this is not the same when, for example, the exit is above the alligatoror just inside the alligator, here the exit is just above, just below, sorry, thegreen line so it's better to look at the bigger picture and go to H4 or thedaily timeframe.
And then price is going nicely we have here at this level, a divergencebetween the Ewave and the price, the price is lower, its at the lowest but notthe peak of the Ewave so now we can look at the exit-green line and thisis the exit signal here with the close of the green counter above the greenline so we have an exit here at this level but again you can look at thesituation on H4, the bars of the Ewave are going down, the alligator linesare open, on the daily timeframe, this is about to cross the zero line, the decision isyours, if you don't want to take this first exit signal, the second onewill be the break of the upper level of the box which is only few pips away.
Let's zoom it, but this time, the box is not below the alligator but it's inside the alligator.
So you can wait for the breakhere, this exit signal will be triggered anyway the next hour and that will beyour exit, alright? So this is the way we manage exits with the floating exits, it'sa lot about decision-making and the trust you have in the trade.
And thatwas our last example, let's sum up now all the exits we have seen in this video and that's it guys for the third andlast video, please check the previous videos: video 1 about the indicators and video 2 about the entries of the strategy.
Guys, this is a very simplestrategy but you know in trading simple doesn't mean easy.
Any comment, anyquestion, you can use a section below or you can also contact me on my socialmedias.
Thanks a lot for watching this trilogy.
Happy tradingand see you soon for another video.