200 EMA Futures Trading Exit Strategy

By: Chris on 2013-06-29

Stock Trading Tips

Iím not sure the significance of this indicator across other futures instruments, but one in particular yields nice opportunities. The instrument that I generally keep this too is the E-mini S&P 500 or /ES. Just as anything else, I strive to combine this with some other analysis.

The indicator as basic as it sounds has provided me with more than just entry prices. In fact my most common use for it is within my exit strategies. The indicator Iím referring to is the 200 period moving average. The moving average itself provides support and resistance across other time frames, but Iím directly referring to its use on a 1 minute chart. Why the 1 minute chart, youíre probably asking?

Why The 1 Minute Exit Strategy For Initial Profits

No specific reason other than this is where Iíve actually used it. I trade based off my analysis from three charts. The charts I generally have on my screen are the 1 minute, 5 minute and 60 minute chart. For me the one minute provides the closest areas of resistance or support for me to make decisions on eliminating risk. Any shorter a time frame may not yield enough separation and any longer I may become greedy on initial risk off targets.

As I alluded to above the most specific and most evident way I utilize the 200 moving average is once Iíve entered into a position. I would say this is possibly opposite to the way you yourself utilize this indicator. As an example and to get a better idea Iím going to try to outlay a situation that occurs almost on a daily basis.


Iíve just entered into a short position coming out of an upward channel as seen below.200 moving average exit strategy

Letting The Market Take Me Out With Stop Orders VS. Limit Orders

We wonít discuss entry here because there can truly be any reason for entry, but how you manage a trade in our eyes creates more successful traders. We know that we never simply exit a trade rather we let the market take us out. So we know that the initial T1(Target 1) is not a simple exit order at the 200 EMA. We have moved a stop order down without being greedy and without crowding the trade by too much.

Generally if I feel strongly that the 200 EMA might hold I may place a stop to lock in profits at around 3-4 ticks above price as it approaches. We also that an approach of a support or resistance may yield quick price action thus this must be done with confidence and quickly. Before price arrives we must have made our decision as to how we will play the trade.

Eliminate Initial Trading Risk With 200 EMA

As noted before the 200 EMA in this case can be a useful target for initial risk off targets thus we take advantage of that before we get any jump in price. At this point we see that price decides to make a move higher off of the green 200 EMA reaching as high as our ďentryĒ. At this point if we have previously eliminated risk completely we may have been stopped out at break even on your final contract(s). No worries here, as weíve already made progress towards success and we move on. If not we know that once price makes its next move lower than our initial target we have an area for which to begin eliminating even more risk.

We can now begin to spot out potential areas of previous support to use as new resistance. These areas will be important to keep the position on until weíve reached the next form of resistance where stops will again be moved up to 2-3 ticks from price. Using the 200 EMA as a target is in our opinion a nice way to eliminate initial risk to allow an more stress free trade mentality. Knowing that ďTrade mentalityĒ and comfort being of importance to clear decision making and profitable trading.

Two Quick Points On Using The Moving Average Exit Strategy

As a final note on the 200 EMA as an exit strategy I make two quick points. First of all an approach to a few ticks from the moving average itself is the same as a tag of the 200 EMA. Thus Iím typically placing orders to lock in profits as we approach and not necessarily programmed to take at the exact mark. My second point is this moving average is both useful for initial and final targets. All basic rules regarding greed and taking profits applies. Iím simply not a stickler for an exact tag of the 200 EMA as I exit.

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It is our hope that you are truly able to gain some value from this approach to trading education. To best take advantage of this site it is important to truly understand concepts and not fall into the trap as most traders. This trap being moving on from strategy to strategy before you master it. Don't become a aware of many things and a master of none!

stock exchange building If you have any questions please feel free to contact me at chris@stocksandstocks.com.

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