Manual

Steve Nison’s

Candle Charting Special Topic

Exit Strategies Syl Desaulniers Nison Certified Trainer™ Nison Candle Software Tech Support

Legal Notice: This webcast and recording is © Candlecharts.com and may not be copied, retransmitted, nor distributed in any manner whatsoever, including, but not limited to, video or audio file sharing sites, online auction and classified sites, discussion forums nor any other means. Illegal redistribution of this content may result in criminal and/or civil fines, pursuant to applicable international copyright law. All rights reserved worldwide.

Candlestick Charting Techniques

Candles + Western Charting Tools

Candles + Trade Management

Exiting a Trade • An area of trading that gets very little attention compared to the other end of the trade – the entry.

Exit vs. Entry • Success in trading has more to do with how you exit your trades, than it does with your entry.

Exit Methods

• Targets • Stops

Stop Loss • Standard stop loss types – Hard – Soft – Trailing

Stop Loss • Deciding on where to place a stop loss is one of the most difficult tasks in technical analysis.

Stop Loss • Standard stop loss types – what’s best?

Stop Loss • Should we use a tight stop loss to cut any losses quickly, or a wide stop loss to allow some room to move? • How quickly should we move the stop loss to breakeven? • Should we take profits at a target, or should we let the profits run, perhaps trailing a stop behind the price?

Stop Loss Strategies 1. Since using Candlesticks for Entry signal, traditionally use the low of the pattern as your INITIAL Stop. – Rules for each pattern are described in full in DVD set

Stop Loss Strategies 2. More conservatively, it is critical that you allow for the volatility of a stock, that is the range a stock moves during the course of a trading day. –

A good rule of thumb is to either set a stop-loss slightly below the low of the Entry day or the previous day, or slightly below a key EMA, trendline or support below the stock (8, 22, 50, BB, etc).

Stop Loss Strategies 3. Use a TDD (Three Day Displaced) Stop - a three day displaced simple moving average (3SMA) - used to determine an initial or trailing stop loss - the value of 3SMA three days ago becomes the stop limit.

Stop Loss Strategies 4. Polarity – If entering on momentum beyond a “former” support or resistance, polarity becomes initial Stop

Stop Loss Strategies • We cannot know, except with hindsight, what will be the most profitable exit STOP strategy for that particular trade. – Sometimes a tight stop is best. – Sometimes a wider stop is best. – sometimes a trailing stop is best.

Targets • • • • • •

Candle signals Moving averages Pivots Windows Trend lines Fibs

• Bollinger Bands • Keltner Bands

Candle Signals • High or Low of confirmed candle pattern – – – – –

Engulfing Sash Hammer / Shooting Star Dark Cloud / Piercing Doji

Morning Star / Bullish Engulfing

Dark Cloud Cover

Bull Sash / Evening Star / Shooting star

Dark Cloud Cover

Moving Averages Traditional • 20/50 • 50/100 • 50/200 • 100/200 • ??/???

Fibonacci • 21/55 • 55/89 • 55/144 • 89/233 • ??/???

55EMA

55 EMA

100 SMA

100 SMA

100 SMA

100 SMA

Pivots 1. An indicator used to determine the overall trend of the market over different time frames. – simply the average of the high, low and closing prices from the previous trading day

Pivots 2. Cycle Highs/Lows used to determine the overall trend of the market over different time frames.

Windows • Candlecharts’ favorite pattern • At times difficult to see – NCS spots them easily

Trend Lines • A line that is drawn over pivot highs or under pivot lows to show the prevailing direction of price. • A visual representation of support and resistance • Used to show direction and speed of price. • Describe patterns during periods of price contraction.

Fibs • The Fibonacci retracement is the potential retracement of a financial asset's original move in price. – use horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before it continues in the original direction.

Fibs • Extensions consist of all levels drawn beyond the standard 100% level and are used by many traders to determine areas where they will wish to take profits. – The most popular extension levels are 161.8%, 261.8% and 361.8%.

What’s possible??

Conclusion 1) The profit or loss taken out of the trade is more a result of the chosen stop and exit method, not our entry. –

For the same entry, there can be numerous possible exits, some profitable, some breakeven and some at a loss.

Conclusion 2) We cannot know, except with hindsight, what will be the most profitable exit strategy for that particular trade.

Conclusion • In other words – the EXIT is more important than the ENTRY. • The EXIT has more bearing on whether the trade ends in profit, or in loss. • But there can be no perfect EXIT strategy that best manages every trade.

Conclusion • Follow your RULES – Live to trade another day!!

Steve Nison’s

Candle Charting Special Topic

Exit Strategies The End Syl Desaulniers Nison Certified Trainer™ Nison Candle Software Tech Support

Legal Notice: This webcast and recording is © Candlecharts.com and may not be copied, retransmitted, nor distributed in any manner whatsoever, including, but not limited to, video or audio file sharing sites, online auction and classified sites, discussion forums nor any other means. Illegal redistribution of this content may result in criminal and/or civil fines, pursuant to applicable international copyright law. All rights reserved worldwide.