Exiting TradesExiting trades especially short term trades at the best possible time should always be the goal if you are trying to catch the little up and downs of a stock. It is something that is often overlooked by the majority of people.The first step to always exiting your trades at the best possible time is to set targets. Setting target can give you an idea how much you expect to make. Remember these targets should be reasonable and based on technical analysis. Do not buy a stock at $4 and have a target of $300. Chances are the stock will never reach that and if it does it will not be for 70 or 80 years. It is much more reasonable to enter a trade when it is at $4 and set a target for $6 in the near term. In addition to targets every trade should have a stop loss order, to allow you to exit out of your losers quickly and with less pain. This should be the most you are willing to risk on the trade and should be decided before you trade. NEVER! move a stop down. Sometimes it is tempting to move a stop down when a stock starts moving against you. It is natural to want to just hold onto the trade for the longer term. This only leads to larger losses which can build up and work against you in the long run. It is ok to move your stop higher as the stock goes higher but you should have a set amount you are willing to move it up. The amount you will move the stop up as the price rises should be determined before taking the trade.Stops are important when exiting trades but don't overdo it. You need to let your stock have room to move. Do not buy a stock at $50 and put a stop at $49.99 because you will sell it for a loss 99% of the time. The last thing you should consider is exiting non-performing trades early. Most short term traders will have some point where they just decide to exit a stock. If the stock has not been making the short term move you were expecting it for many days in a row it may be time to exit the trade early and find a better opportunity elsewhere. |
