The Strategic Trader
Detailed Strategy Evaluation

Exit Strategy

Exit Strategy Part 1

Entries are important, but exits are where you make your money. A strategy can not be complete without fine tuning both sides. In this article series I will explore various exit strategies to determine which are effective and which are not. The end goal is to create an exit strategy that makes a random entry strategy profitable.

To succeed the exit strategy must remain profitable over 100 continuous runs with an average profit factor over 1.2. The random entry strategy will target 5,000 trades over the testing period. This is a rather lofty goal. In fact, it may not even be possible. However, we can learn a lot about various exit strategies and dynamics by attempting it.

Time Based Exits
This is a very simple concept. Exit after x number of bars have passed. We use this method often while evaluating entries because it provides a good reference point.

Results:
As we already knew, this method fails to make a random entry strategy profitable. The best results were only able to achieve 44 of 100 runs profitable and -$2,000 average profit.


Trailing Stops – Ticks
I will use NinjaTrader’s SetTrailStop() method set to CalculationMode.Ticks.

Results:

No combination produced a single profitable run.


Close > Close 1 Bar Ago
The strategy will exit if Close > Close 1 Bar Ago.

Results:

This was a a big surprise. The strategy was actually profitable on 88 of 100 runs with an average profit of +$8,823.  PF = 1.05, WIN % 68


Close < Close 1 Bar Ago
The strategy will exit if Close < Close 1 Bar Ago.

Results:

Only profitable in 5 runs


Close < Low 1 Bar Ago
The strategy will exit if Close < Low 1 Bar Ago.

Results:

15/100 Runs


Close > High 1 Bar Ago
The strategy will exit if Close > High 1 Bar Ago.

Results:

Profitable in 92/100 runs. Average Profit +$15,931 PF = 1.07 Win % 68


RSI(30) > threshold
The strategy will exit when RSI is above a certain threshold. When testing RSI we determined there was an edge to short when RSI went above a threshold. Therefore, we can assume it may be a good time to exit long positions.

Results:

As expected the strategy performed well. Profitable in 82 runs. Average Profit +$10,131 PF = 1.04 Win % 71

Summary:

So far we have only looked at very simple exit logic and already see that reaching our goal may be possible. Future articles will be one article per exit strategy as we begin to tackle much more complex exit strategies.

Related Posts:



Share

Archives

Designed by Get Paid Online and coded by Australian Survey Sites and Cashcrate.