Exit Strategies
Last updated
Last updated
Exit strategies define how an existing position will be closed using a combination of one or more orders. This new feature replaces the existing Entry/Exit Strategies in previous versions of MotiveWave™.
The Exit Strategy control can be found in the Trade Panel as well as the DOM Panel. In the screen shot below, the Exit Strategy control is shown in the Position tab of the Trade Panel.
Exit Strategies are applied when clicking on one of the entry order buttons in the panel. Use the green power button in the right-hand side of the control to disable this feature (disabled by default). For example, in the screen shot below if you click on the Buy Mkt button, the Bracket 1 strategy will automatically be applied once the market order is filled.
In the case where a position already exists, you can press the attach button (paper clip) to apply the selected strategy to the open position. In the screen shot below the Bracket 1 strategy has been applied to the existing open position (1@2875.75). This created two orders: a stop and a limit submitted as OCO (One Cancels Other).
Exit Strategies may be configured from Trade Panel settings or from the DOM Panel settings (see Exit Strategies tab).
Click on the + button to create a new strategy. Existing strategies may be modified by double clicking on them. Three default strategies are available (which may be modified). These strategies implement 1, 2 and 3 bracket orders (stop loss + limit). Existing strategies can also be copied.
The following dialog is displayed when modifying or creating a new strategy. This dialog has the following options:
Name – Each strategy must have a unique name
Offset Type – Defines the type of offset used (see Stop Offset and Target Offset). There are two options:
Ticks – use a specific number of ticks (minimum price movement for an instrument) from the entry price.
Percent – use a percent of the average entry price. This is often used for stocks. For example, if you set an offset of 1 percent and your average entry on a stock was $10, then the offset would be $10 x 0.01 = 0.10.
Risk – Use these options to automatically set the size (quantity) based on a risk value. There are two risk options that may be used:
Percent of Account (%) – Dynamically calculates the maximum loss based on a percentage of current account balance.
Fixed Amount - Sets the maximum stop loss to the given amount.
Break Even – Sets the number of ticks/percent for the trade to move in a positive (profit) direction before moving the stop loss to break even.
Offset - An additional offset may be specified to set the stop loss above/below the entry price (often used to account for commissions and or spreads).
Step Table – Use this table to define the number of steps (order levels) in this strategy. Each step may have a stop loss and/or target (profit) orders. If both a stop and target order are defined for a step, these orders are submitted as an OCO (one cancels other) order. When one of the orders gets filled the other will be cancelled.
Quantity (%) – This defines the size (quantity) of the order as a percentage of the entry quantity. Quantities are rounded to the minimum step size for the instrument. If all of the steps add up to 100% of the entry quantity then the remaining quantity is assigned to the last step.
Stop Offset – Offset from the average entry price where the stop/trail order will be placed. For a buy (long) position this will be the avg entry – stop offset. For a sell (short) position this will be the entry + stop offset.
Type (Stop Loss) – Two options are available for the stop loss order:
Stop – Regular stop order. When the stop price is hit the order will be filled at market price
Trail – Trailing stop order. The order will follow the price to maintain a maximum of the stop offset away.
Check Box – Use this option to enable or disable the stop order for this step
Target Offset – Offset from the average entry price where the target order will be placed. For a buy (long) position this will be the avg entry + target offset. For a sell (short) position, this will be the avg entry – target offset.
Type (Target) – Two options are available for the target order:
Limit – Limit order. This type of order guarantees the fill price but does not guarantee that the order will be filled when the target price is reached (limit orders are typically filled in the order that they are received by the broker).
MIT – Market if Touched order. This type of order guarantees that the order will be filled when the price is reached. However, the fill price is not (filled at market price).
Check Box – Use this option to enable or disable the target order for this step.
‘+’ or ‘x’ button – use these buttons to add or remove steps.
The screen shot below shows the Bracket 3 strategy executed from the Buy Mkt button in the Trade Panel. Three stop/target order pairs were created using the offsets defined above (10 ticks for each stop and 10, 20, 30 ticks for the target orders). Offsets are placed from the average entry price for the filled market order.
Risk based Exit Strategies are useful for controlling the amount of capital at risk during a trade (see Risk field in the Exit Strategy dialog in the previous section). The risk is controlled by automatically choosing the quantity when placing an entry order. There are two types of risk-based strategies:
Percent of Account – The amount at risk is a percentage of the active account balance. For example, if you had an account balance of $50K and the risk setting for the strategy was 2%, then the amount at risk would be 50K x 0.02 = $1000.
Fixed Amount – With this option you can specify exactly how much money you want to risk in a trade (ie: $500).
The example below displays the settings for an Exit Strategy that risks a maximum of $500.
The quantity will be automatically computed when a risk-based strategy is chosen. The quantity field is also disabled so that it cannot be changed. In the screen shot below the “Risk $500” strategy that we defined above has been chosen. Using the stop offsets in the strategy, a quantity of 4 is computed and set in the Qty field.
Depending on the instrument you are trading (and your stop offset settings), it may not be possible to set a quantity that will match exactly the risked amount. In cases like these the quantity value will be rounded down to the nearest valid quantity.
If the risk amount is too low, the quantity may work out to 0. In this case the order entry buttons will be disabled to prevent placing an order since the maximum risk amount cannot be met.
