Test your EA’s Trade Exit

A little over 100 years ago, in 1903, the Wright Brothers achieved their monumental goal of flight at Kitty Hawk, North Carolina.

Most people don’t know that there were quite a few other people trying to build an airplane at the same time. One was Alexander Graham Bell; another was the President of the Smithsonian Institution.

All of these men were much better funded than a certain little-known pair of bicycle shop mechanics from Ohio with a wind tunnel in their garage.

But there’s a key difference that led to the Wright Brothers’ success.

The other guys focused on making a more powerful engine.

Orville and Wilbur Wright focused on the plane.

Specifically, the Wright Brothers built their airplane as a glider without an engine – then mounted the engine later, almost as an afterthought.

They flew it in the breeze first, then added power later. That was the key to their success. They discovered that when you’re building an airplane, the wings are more important than the engine.

What does this have to do with Forex Trading?

When you build and test an Expert Advisor you need to focus on the part that’s really important.  The part that’s responsible for the bottom line.

Most traders spend their time and energy searching for the perfect trade entry.

But the fact is, the entry does very little for most trades.  Gets it started in the right direction, but that’s about it.

It’s the trade exit that makes the money.  Or loses money. Both of these goals are equally important:

(1)  Squeeze every bit of profit from your winning trade like wringing water from a washcloth.

(2)  Drop a losing trade faster than you can say “margin call” and stop the bleeding right away.

In the 3 Metrics PDF I describe a simple method I use to test the quality of my exits.

For each winning trade I make a note of when the trade was closed.  Then I look to the left and the right on the chart and find what the optimal exit time would have been.

I study the price action or indicators values around the optimal time and see if I could improve my exit strategy.

You can use the “exit test” the same way the Wright Brothers used the wind tunnel in their bicycle shop. To perfect the airplane before going out to “the big time.”

NOTE:  Right now I test my exits manually, but there has been talk on our forum about adding a method to test the quality of an exit inside of an EA.  If there is enough demand for this I’ll add this feature to a later release of VTS. That’s the way we roll.