Entry is more important Or Exit in a trade to be a successful trader

General
41

@Vandana1 You are absolutely right👍

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42

:smiley::smiley::smiley: enjoy the evening

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43

Same to you :grinning:

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44

ENTRY is more important than EXIT !!!
Because if your direction(decision at entry) is correct you can exit at whatever profit you get.
But if your direction is wrong then you will be getting out with a loss for sure.
Therefore probability of capital preservation in first case > probability of capital preservation in second case.

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45

In my experience, exit is far more critical than entry for becoming a successful trader. Here’s why:

I don’t put much faith in price action, support/resistance, or indicators. None of these methods work consistently all the time. When you take a trade, the outcome boils down to just two probabilities: the price goes up, or it goes down. The magnitude of the movement can vary, but the direction remains binary.

What truly matters is managing your exits with a disciplined risk-reward (RR) strategy. Where I enter becomes less relevant as long as I execute my exit properly. For instance, consider the analogy of tossing a coin. Over a small sample size, you might see an uneven distribution of heads and tails, but as the sample size grows large (10,000 tosses or more), the probabilities converge to 50/50.

Apply this principle to trading:

  • Pick a stock or futures chart (options behave differently due to time decay).
  • Randomly take two trades a day using a 1:2 RR ratio.
  • Backtest this over a large sample size, say 10,000 trades, and you’ll see how discipline and RR outweigh entry strategies or “luck.”

The key point is:

  • Discipline and proper RR make you profitable, not indicators or price action.
  • Even luck has its limits—it only works over small sample sizes. Over time, luck erodes its edge.

In fact, if you identify an edge in the market, algorithms are likely already exploiting it. As algos trade that inefficiency, the edge will eventually diminish.

For those interested in backtesting, you can validate this in tools like AmiBroker or other professional platforms. However, keep in mind that most algorithmic strategies cap returns around 30-35% annually. This is still substantial, especially with capital above 50L or above.

Of course, discretionary traders can outperform algos significantly, but that requires a different skill set and mindset, a whole other ball game.

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46

Yes, many successful traders have emphasized the importance of RR in trading. Traders like Tom hougaard, completely rely on RR, they make substantial return with strategy having as minimal as 30-40% accuracy. In my perception, to increase RR, the focus should be in reducing loss and keeping it as minimal as possible, obviously that will also cost on accuracy, but finding a strategy that offers atleast 30-40% accuracy with a good RR is still easy instead of following strategy with good accuracy but minimal RR. I mean, the percentage of loss we want to book is always in our hands, but profit is not.

47

FINDING A TRADE IS MOST IMPRORTANT:

As a Nifty options buyer since August 2023, after many losses and learning’s, I figured that placing a good trade once or twice a week could also make you profitable, but for that you need a good chunk of capital and your directional view should be correct.)

Price action is starting to work for me as I can see nifty respecting support and resistance levels sometimes.

If someone could recommend a good book on price action, I would be forever be greatfull.