IQstrat, as tested, does the following with respect to risk mgt. and exit:

• Establishes a stop order (stop order A) at opposite channel line as soon as entry occurs. This stop is the fail-safe and will exit entire position. Stop order A is moved up at key points throughout the trade (see below).

• Takes half off of the position at key levels (as mentioned in risk management section)

• Moves stop order A to nearest channel line when whole of candle exceeds channel line for 3 consecutive candles

• Moves stop order A to entry when profits are taken.

• Takes profits if bar closes back within channel after large move.

• If candle moves across opposite channel line, exits position

Use the above guidelines in combination with the IQstrat Algorithm to trade successfully (see examples/info below).

Chart Above: Pointer 1 shows a perfectly positioned marked candle that becomes an actionable candle as it breaches the lower (red) line of the displaced channel. Like A shows where entry into a short position should occur and line B is where the intial stop should be placed (just above the opposite channel line from entry). Notice that the S1 (support 1 as part of the Pivot Points indicator) line has been extended across the chart via the blue line. This is an optimal area to take profits for this trade. An advanced way to manage this from a discretionary point of view would be to chase the price action downward once this level is reached with an order to buy back half of your position. Then your stop should be moved to entry (line A) to let the rest of the position ride as long as possible. In this case price comes back to the entry and the entire position would have been exited.

Pointer 2 shows a maked candle that is not ideally positioned as its body is positioned entirely outside the channel with only its tale within. This candle is actually a better indicator of pice level being supported than of an upcoming upward price movement. The marked candles that follow are also indicative of price level support with the last marked candle being an ideal actionable candle as well.

Line D designates where entry would occur while line C is the optimal initial stop placement.

Pointer 3 shows when stop could be moved to entry (also a partial profit taking order could be placed just under this candle).

Pointer 4 shows an optimal place to take profits as price approaches the Pivot Point (PP) level. Ideally one could also chase price upward with a partial profit taking sell order at this level. Note that another marked candle appears while letting this trade ride. It is risky to take on another position at the actionable candle that follows because price is bouncing around the PP level and there is not much defined reward given the risk (the size of the channel) as explained in the risk mgt. section. In other words the relative high is quite far away and the profit taking level of another trade is at hand.

Pointer 5 shows the place where the entire remaining position should be exited. Note that there are several buy oriented marked candles following this exit but no actionable candle emerges and no other buy positions would be executed on this day.

Although we are not offering the IQstrat code to the general public at this time, you can still duplicate the results by using the rules for exit mentioned above in combination with the IQstrat algorithm (which marks the bars vital to the strategy and IS available for purchase). In many instances it is better to be discretionary about managing and exiting a trade because nothing can beat a human’s ability to observe what is going on in real time. The key is being able to follow the rules and not getting emotional.

“I use a segmented style of IQstrat where I let the algorithm identify the opportunity and then I manage the trade personally because I feel I can often do a better job than the program at maximizing my profit potential. I use the automated trade management for longer term trading and for when I have to step away from my trading desk.”

- Founder and CEO Matthew Lyden

Recap:

1). Let the IQstrat Algorithm identify the opportunity (ideally positioned marked candle)

2). Wait for an actionable candle and then place stop above/below for entry.

3). When order fills manage the trade by posting a stop at the opposite channel line immediately and take profits at key levels.

4). Let the trade run if you can but don’t turn a winning trade into a losing one and exit the position if the price comes back below the opposite channel line.