Scaled Exits
Scaled Exits settings are global and trigger exit signals based on trend exhaustion. They can be used to close positions incrementally in order to secure profit.
General Considerations
Scaled Exits are an important Risk Management tool used to secure profit by closing positions incrementally. Consider the following when setting Scaled Exits:
Profit Targets - define realistic exit targets.
Position Size - decide the percentage of your position to be closed at each target. e.g. earlier exits may be proportionally greater to secure profits and reduce risk. See Scaled Exit %.
Volatility: In volatile markets, closer exit targets may be advisable to secure profits quickly. In stable trends, broader exit targets may capture more profit.
Technical Analysis- consider significant price points such as support/resistance or Fibonacci levels when setting orders.
Fundamental Analysis - adjust Take Profit levels based on expected major events.
Risk Management - Scaled Exits manage risk by securing profits, but also reduce potential gains if the price continues to move favorably.
Risk-Reward - align Scaled Exit levels with your desired risk-reward ratio.
Psychology - use Scaled Exits to maintain discipline and avoid emotional decisions.
Strategy - Scaled Exit orders should align with your overall trading strategy.
Broker/Exchange fees - setting fewer orders may be sensible if fees are high relative to profit.
Scaled Exit %
The Scaled Exit % setting in the Confirmation Control section determines what percentage of a position will be closed when an exit signal is generated.
Backtesting Strategies Including Scaled Exits
Source
Sets the data source used for exit calculations:
Open - open price
High - highest price
Low - lowest price
Close - closing price
Hl2 - average of high + low price (H+L/2)
Hlc3 - average of high + low + close price (H+L+C/3)
Ohlc4 - average of open + high + low + close price (O+H+L+C/4)
Hlcc4 - average of high + low + double-weighted close (H+L+C+C/4)
Elements of other loaded indicators can also be set as a Source. This allows the use of Lendal Visualizers as the data source to determined scaled exits.
Evaluation
Specifies if acceleration or price action is used to determine trend exhaustion and trigger exit signals. This feature can also be turned off.
Strategy
Specifies if Std. Deviation Period and Standard Deviation will be adjusted manually or set to a short, medium, or long-term preset. Longer timeframes make the exit series less sensitive to volatility resulting in fewer signals.
Preset
Specifies if the Fast EMA Period and Slow EMA Period will be set manually or according to the selected preset. Presets containing longer moving averages will be less sensitive to volatility resulting in fewer signals.
Fast EMA Period
Sets the time period for the fast EMA used to calculate the exit series. Decreasing this value will make the exit series more sensitive to volatility resulting in more frequent signals.
The Fast EMA is shorter and more reactive to price changes than the Slow EMA.
Slow EMA Period
Sets the time period for the slow EMA used to calculate the exit series. Decreasing this value will make the exit series more sensitive to volatility resulting in more frequent signals.
The Slow EMA is longer and less reactive to price changes than the Fast EMA.
EMA Signal Smoothing
Specifies the amount of smoothing applied to the exit calculation to generate a signal line. The system uses this line to determine trend exhaustion. Decreasing this value will make the exit series more sensitive to price fluctuations. However, adjusting the Fast EMA Period or Slow EMA Period influences sensitivity to a greater extent.
Std. Deviation Period
Sets the number of lookback periods used to calculate Standard Deviation. Increasing this value will make the exit series less sensitive to volatility resulting in fewer signals. The Std. Deviation Period and Standard Deviation settings can also be adjusted using the Strategy presets.
Standard Deviation
Sets the standard deviation used to determine trend exhaustion. Generally, Standard Deviation (sd) should be increased as Std. Deviation Period (p) is increased. e.g. p = 10, sd = 1.9; p = 20, sd = 2; p = 50, sd = 2.1. However, these settings may not suit some assets.
Increasing this value will make the exit series less sensitive to volatility resulting in fewer signals. The Std. Deviation Period and Standard Deviation settings can also be adjusted using the Strategy presets.
Last updated
