A Guide to Intraday Trade Exits, 15 Methods
Exits are just as important as entries. For daytrader there are many ways of exiting a trade intraday.
These exits can follow intraday trends to the maximum but using them you have to cope with being right less often. However, a surprising 1:10 trade out of these 5 losses in a row can make the whole thing work.
1. Trendline Exit
By drawing a trendline you can exit the position on a breach or close breach. To draw a trendline always the same, a few rules are helpful for you, so it doesn’t become too subjective.
2. Simple Moving Average Trailing
The 50 MA in the minute-chart is useful for trailing the bigger move. This works on Minute and Tickcharts. The highest minute-timeframe for daytraders is a 15-minute chart in my opinion. You can close the position similar to the trendline.
3. End-of-Day Exit
Simply closing the trade before the close is a good way to let a position run.
Targets as an Exit
Targets are good for exiting the whole position or a part of it. Some people prefer closing 1/3 on the first, 1/3 on the 2nd and 1/3 on the 3rd level. When in addition determining if a level is a resistance/support or a breakthrough price you can decide even better whether to hold or sell an open position. Distinguishing between break and hold price levels can be achieved for example by waiting for the the 1-minute close (easy way) or analyzing spread, orderbook and tape behavior right when the level is tested.
Good levels to watch out for:
Market Profile Levels
Valley highs and valley lows from previous days, that are not retested yet.
Camarilla Points and Pivot Points
These points are mathematical calculations from the previous day. Pivot Points are (High+Low+Close)/3 etc. and camarilla points are Fibonacci based ratios from the previous day’s range. However, if the previous day was rather extreme, they are quite useless.
Previous day high and low, swing pivots, open price and close price of last day
Very obvious levels where a lot of volume is mostly traded (open and close) and very slim volume is traded (high, low and swing pivots). The principle is similar to the Market Profile Approach and levels can intersect. Yearly highs and lows however should be treated a bit different, because on these price points major breaks can happen.
Every future also has an underlying on which options can be traded. Knockout levels can be drawn on this underlying to determine where option buyers and sellers are likely to be “knocked out”.
Trendlines on the daily
Very straight forward, after a major trendline breaks the past long-term market structure is broken and new orders are coming in.
Convergence and hollow areas
If you draw all the interesting price levels on the chart you can see there are cluster, convergence areas and hollow ones. When planning a trade, you can choose to trade into hollow areas with farer away targets, thus for a better risk/reward situation. In convergence areas it is more likely that prices are slowing down or if they break quickly, that they act as a stronger support/resistance.
Certain pattern can give a hint that prices are about to reverse against your position.
Candlestick Formations on the minute chart
When one of these candlestick patterns forms clearly against your position you might consider an exit. More on candlesticks in another article.
An example are the “5-candles-above-8-EMA”, which are a sign of an extended move that is about to end.
A volume spike which can be defined by ~2.5x the average daily volume is a good exit in strong trends. Further analysis of the tape to see if it is outgoing or ingoing volume is needed.
Changing Behavior in the Orderbook/Tape/Spread
This one requires a bit of practice and a bit of knowledge about market structure and how to read the tape. Examples:
- big orders in the tape
- spread is widening up unusual
- orderbook is skewed to the bid side
An interesting way to manage your positions is to make cash-flow trades. Basically you will hold a core position and sell 2/3 in the gain-move and buy back 1/3’s in the correction or at more levels. An example: