Our Quad Exit Strategy
This useful tool is helpful in sideways ranges and trending markets alike.
We use Quad exits to honor the principle of “Choices.” Our approach is an “all in” system with a high expectancy of immediate profits based on the action-reaction principle. We are contrarians and are fading moves.
We exit half of the position shortly after entry for small gains to mitigate risk. Then we take another 25% off the position on our first target and another 25% on our 2nd final target.
Here are the significant advantages of the Quad Exit Strategy:
It is typically getting more and more stressful for the mind through increased fear that gained profits might disappear. The quad exit supplements by making you emotionally an instant winner on your first exit.
The principle is that the more extended a move, the more extensive the possible snap back to the mean. Fear of missing out on profits tends for amateur traders to either make a tight stop, which takes them out or worse, they use a stop somewhat in the middle, taking quite big profits away and still getting stopped out. Principle-based, though, is to have either an extensive stop or take a profit target. However, both are very hard to do due to our human psychology.
With the Quad Exit Strategy, you erase these hardships. You exit with half to mitigate risk and create a psychological balance, following the instinct to cash in. Now you have two segments of each 25% of the total position size still left to be very flexible in maneuvering.
In our personal experience, after the second exit with yet another profit booked, one is very much at ease to let the runner (= the last 25% of the position size) do what it needs to do: RUN!
Even if the runner target fails, the runner will get stopped at break-even entry levels, and we still took profits on 75% of our original position size.
Typically, one is glued to the screen when prices go into one’s favor with a biased emotional emphasis on up and downticks. With the Quad Exit Strategy, however, you have an emotionally balanced mindset since 75% of the positions are successfully cashed in already. Now you can apply reliable technical analysis for the runner part.
That means evaluating how much risk you are willing to take for this part of the position versus how likely the projections are for it to go further.
You can do this unbiasedly and with a fresh mind.
It also allows for wide and accurate stop placement and makes you see the market for what it truly is.