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The Manage Stage
Summary: The Manage Stage is where you define how positions are managed, from the moment the decision to take the position is made, until the moment the decision to exit the position is made.
Foundations->Node->Manage Stage->Definition
The manage stage deals with the setting and management of stop loss and take profit targets, both to protect your capital and to increase the efficiency of your trading system.
Foundations->Node->Manage Stage->Content
Optionality
Note: This Stage is optional. That means that if you do not want to deal with Stop Loss or Take Profits at your strategy, you can just delete this node and everything will continue working just fine. If you do remove this node, what will happen at runtime is that as soon as the position is triggered, the system will detect that that the Manage Stage is undefined, and it will jump it by opening the Close Stage (if it exists, because it is also optional)
This is how optionality looks like at the code:
/* Opening Status Procedure */
if (tradingEngine.tradingCurrent.strategyManageStage.status.value === 'Opening') {
/*
The system allows the user not to define a Manage Stage, because the Manage Stage is optional.
Here we are going to see if that is the case and if it is, we will inmidiatelly consider
the Manage Stage as closed.
*/
if (tradingSystem.tradingStrategies[tradingEngine.tradingCurrent.strategy.index.value].manageStage === undefined) {
changeStageStatus('Manage Stage', 'Closed', 'Manage Stage Undefined')
changeStageStatus('Close Stage', 'Opening')
return
}
/* Now we switch to the Open status. */
changeStageStatus('Manage Stage', 'Open')
} Tip: If both the Manage Stage and the Close Stage are undefined, what will happen is that whenever the Open Stage gets closed, you will exit the position.
Manage Stage Concept
The first and foremost rule of trading is to preserve capital and its main goal is to increase it.
Conceptually, a position is not an instantaneous event, but an event which has an opening, a period of maturation, and a closing. The management of the position happens throughout the process.
The concept of managing the position refers to the fact that the formulas that determine the take profit and stop loss targets may change as the position develops. A typical situation in which you may want to change your original take profit and stop loss formulas is when the position seems to be developing well in your favor.
It may be in your best interest to manage the stop loss, moving the target in the direction that would help protect unrealized profits. It may also be in your interest to move the take profit target to extract a larger profit than originally expected. Or you may wish to set up a mechanism that closes the trade as soon as a certain market situation materializes.
The management of take profit and stop loss is done independently of each other, in phases. Therefore, each concept has its own set of management phases.
Each phase has its formula to describe the corresponding target. Users may define situations in which the current phase shall be abandoned and a different phase—with its formula—shall be implemented.
Keep in mind that the position is in constant development, so there may be as many phases as you deem appropriate for your particular strategy.
The idea of managing targets in phases derives from the notion that big market moves tend to provide clues as to what may come up next. For instance, rallies may accelerate as more traders join the move. Recognizable patterns may emerge. Signs of exhaustion may be identified.
All of these considerations may feed the dynamic analysis performed in each phase as the position develops.
Upon execution, the system verifies if the current candle has tagged either of the targets. If—or when—it does, the close stage kicks in and closing execution begins.
It is crucial to understand that Superalgos does not place orders to close a position until the stop loss or take profit targets are hit. That is, stop loss and take profit are not orders sitting at the exchange waiting to be filled at a certain rate. Instead, Superalgos keeps track of targets internally, and places the orders at the exchange during the execution cycle in which it detects either of the targets has been hit.
This behavior has advantages and disadvantages, but it was designed as is because the former outweigh the latter.
By not placing stop or take profit orders at the exchange, Superalgos keeps your targets—and the underlying strategy—secret. This guarantees that such a crucial piece of information may not be used against you by the exchange itself or any third party that may have access to privileged information.
On the other hand, not placing a stop order in advance may occasionally cause relatively more slippage, for instance, in cases of massive flash market moves.
Tip: That said, the default behavior of the system may be hacked to avoid the eventual risk of excessive slippage: set your stop loss and take profit targets tighter and place limit orders to close the position.
Foundations->Concept->Reusable Snippets->Note for Hierarchy Tables
Note: This page discusses the top-level information about the section of the hierarchy represented in the below table. Click on any of the nodes to get the details, including particulars on their configuration, when applicable.
Managed Stop Loss
Foundations->Node->Managed Stop Loss->Definition
The managed stop loss node features the definition of the phases that make up the management of the stop loss target as the position develops.
Foundations->Node->Managed Stop Loss->Content
A stop loss target is a crucial element of a trading strategy, as it is the device in charge of preserving capital. Used wisely, the management of the stop loss may also play the role of protecting unrealized profits.
The system for managing the stop loss provided by Superalgos is highly flexible. It may start as simple as a constant value at a certain rate, but may switch to a trailing stop as soon as the price moves away from the target rate by a certain percentage, or when a certain market situation arises.
In fact, the formula may change as many times as required, as you may set up unlimited phases, and switch back and forth as required using predefined events to make the switch.
Note: The above example of a constant stop loss followed by a trailing stop is merely an example of a typical setup. The formulas you use to determine the rate of the target on each phase may be anything you choose, thus, you may achieve whatever behavior you imagine and can describe mathematically.
Managed Take Profit
Foundations->Node->Managed Take Profit->Definition
The managed take profit node features the definition of the phases that make up the management of the take profit target as the position develops.
Foundations->Node->Managed Take Profit->Content
A take profit target bears an important role in your strategy, as it plays a crucial role in determining the risk/reward ratio of the trading opportunity that materialized, and upon which your strategy acted to take a position.
The foremost goal of trading is to increase your capital, and how you set your initial take profit target and manage it afterward determines how much you may increase your capital given a favorable price action.
Note: The system provides the same functionality for managing the take profit target as explained for the managed stop loss target, so please make sure you go through that section too.
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