"The professionals plan
their trade exits in advance."
Because system traders must have complete systems to operate their trading methods, it follows that there are predetermined rules covering all eventualities, including those for exiting any trade.
There are always two sets of exit rules. One of these covers the normal 'profit exit' for trades that develop as hoped.
The profit exit point has been positioned to maximize the profit opportunities presented to all the 'successful' trades - according to the principle of run your winners.
These winning trades are given the maximum chance to develop and so the exit policy is never to be in too much of a hurry to take profits. Experienced traders are prepared to give back 'open position' profits in order to stay in trades that have the potential to grow into big winners.
The other exit is known as a protective exit that is used to close the trade if it goes into 'losing mode'. This follows the cut your losses principle.
Exit points are firmly specified by the system rules and cannot be varied in any particular case. This removes the possibility of confusion on the part of the trader about 'what to do' and the pressure to make decisions when emotional stress would be high.
Professional traders understand the importance of sticking to their system - in fact it's their 'First Commandment'. So whenever the system signals 'exit' then an exit it will be!
Delaying exit from a trade against your rules for any reason is always a bad idea and something no professional trader would ever think of doing.
By delegating his system to be run on a computer, there is no opportunity for a systems trader to violate his exit rules. He won't be 'there' to second guess his system and that's the reason for delegation in the first place - to avoid any possibility of later interference.
Yes, professional commodity traders plan their whole system actions in advance - and that includes their exit rules.
Copyright David Bromley 2006
All Rights Reserved.