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sign is a precise action at a specific price, the exit can be played several different ways, each of which has its advantages. This section will discuss the choices for your consideration. The choices are up to you, based on your risk perspective and personal preferences: |
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If this trade is not going as planned and it hits your IPS, get out now! There's another good trade coming that needs your attention. |
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You're in the trade and it's moving your wayyou even have a small profit in it already. Do you set a breakeven stop? A breakeven stop has the advantage of removing your risk. You will exit the trade if the price moves back to your breakeven. But be careful, if you do it too early you will get taken out of trades that would prove to be quite good. |
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There is an internal struggle in all of us. Should you sell now and take your profit, or hold on and hope for more profit? A popular notion among some good traders is to never sell your whole position at one time. Instead sell part when you have reached an acceptable profit level, hold the remaining part to see if you can reach a higher level. Just remember to tighten the stops on that remaining position. Don't let a winner turn into a loser. |
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There are two widely used methods for setting trailing stops. |
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1. Profit protection. In this method, the trader calculates the profit in a trade and sets a stop to protect a portion of that profit. We have seen dozens of these systems. Here is one that is simple, yet has proven to be very effective: |
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Until you have a gain in the trade of $2 per share . . . you keep your stop at the IPS. This is to give the trade room to work. |
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