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Registered User
Joined: 12/22/2006
Posts: 26
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Hi everyone,
I'm extraordinarily new to the technical trading arena and was wondering if someone could tell me how to determine exit points. I've been looking at some of the suggestions made on this board and I continue to be bombarded with the thought, "Yeah, but how do you know when to get out."
Can someone point me in the right direction?
Thanks,
Steve
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Registered User
Joined: 12/2/2004
Posts: 1,775
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Start with the basics and don't get too complicated, i.e. note where a stock's trend lines, support levels, and 50 and 200-day moving averages are. When price breaks through those barriers (especially with higher than avg. volume) immediately sell one half the position at a minimum, maybe all. If you sell all and your research says the stock still has strong fundamentals despite the sell off, keep it on your watchlist for a few days or weeks with possibility of buying back in at future date. I'm speaking from the perspective of a swing to medium term trader of weeks and months, no daytrading.
As for exits on when to sell and take profits, that's actually harder imo. But it's helped me to always sell about 1/3 to 1/2 the position as soon a gain of 15-20% is made, and then to make sure the remaining position does not turn into a loss. Once I've sold a piece of the position for that profit I then move my original stop loss to slightly above breakeven, and then if price continues upward I move the loose stop up in tandem.
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Registered User
Joined: 10/4/2005
Posts: 5
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Hi,
I've been using a new system that I like. I've been investing since 87. Each day I post my closing prices in an Excel sheet. At the end I have the percentage gain or loss for the security (5 positions, equal dollar amounts). In the next column I manually post the highest percentage gain in the security. I only allow this reference number to go up, not down. Sometimes this column carries a slightly negative number for a week or two for a newly initiated position (maybe I should keep this number at zero? Hmmm). If the stock moves up to a 25% gain and then moves back to an 18% or so I would probably lock in half my gain,(my last column would still read 25%) at 12 to 15% the whole thing. If the stock shows an 8% loss it gets sold and it's usually earlier than that. Each day I can evaluate each position to see if I should buy more(I usually buy and sell half positions)or lock in half or all of my gain. I have one speculative stock with a minus 22% right now. Last week I locked in a 52% gain on a half position (I was putting the numbers in during the day) and while deciding on what to do with the other half the stock has slid to a 33.21% gain. I try to sell on the upswing. For example the maximum possible gain on that position was 53% but I could only see that in hindsight. See how it can protect you from yourself? You're forced to re-evaluate each day and it helps me to see my "possible" profit evaporating.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Typically stops go hand in hand with your profit
technique. If you trade in the short term and take profits
quickly a large stop does not make sense.
Stops come in a few styles:
(all these relate to long stops)
1)Chart: these will be determined by recent lows on chart
and areas of support. (MIN low last 10 bars, and so on)
2) Trailing: You will start with a stop level and raise it as
profit is made.
3) Volatility: The stop will be under price determined by a volatility
method. (ATR or average H-L range). The more volatile the stock
the further away the stop will be.
4) Profit: You will start with a fixed stop. As soon as your position is
profitable you will raise your stop to half the profit level. If you position
has a $500 profit your stop will be $250. If it goes to $800 you will raise
your stop to $400. (and so on)
5) Indicator: You will start with a fixed stop. You will use an indicator
turning negative as a sell signal. (MACD below zero, Dual moving average
cross,and so on.)
The general rule of thumb for an open trade is risk vs reward. Stops too
far away wont get hit to often but you will lose a lot of profit when they
do. A stop that is "close" will protect profits but normal stock volatility
will cause you to get stopped out.
The general rule of thumb is in short-term trading you decide when to
take profit. Over longer time frames you will let the stock hit its stop
or use an indicator sell.
-----------------------------------------------------------------------------------------------------------------
This is from an old post of mine:
"If you do not know how to determine support and resistance. Then you should
use a fixed stop. Let say 8%(since it was the topic of recent Worden discussions)
You could also try some position size money management.
Lets say you want to buy a stock thats $30 a share.
Lets say your account is $10,000.
You will only risk 2% of your account on any trade.
$10,000*2%= $200
Since you are using an 8% stop on a $30 stock.
$30*.92=27.6
30-27.6=2.4 dollars of risk
200/2.4=approx. 83 shares.
So on this trade you will buy 83 shares at approximately 30 dollars a
share and set your stop at 27.6.
This will give you 2% account risk.
This will at least give you a controlled way of doing things."
-----------------------------------------------------------------------
Thanks
diceman
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Registered User
Joined: 1/12/2006
Posts: 296
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For newbies, rather than being verbose, the following is a simple, time-tested, and very effective strategy to employ.
Stochastic (SI): When SI crosses 75, sell. When SI crosses 25, buy. This will eliminate the "whipsaws" associated with using the K and D crossover technique which can occur throughout the range from 25 - 75, and especially hold you in a position for further gains, rather than selling simply because SI has reached 75.
To quote J Bernstein: Through the years I have found that the ideas of overbought and oversold are fallacies. The fact is that a market is never too overbought to go higher and hardly ever too oversold to go lower.
As time/experience fortify your knowledge, many methods are available for investigation and your own creative refinement.
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Registered User
Joined: 12/22/2006
Posts: 26
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Thanks to all. I need some time to digest the info everyone provided, but wanted to let you know I appreciate the help.
Steve
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Registered User
Joined: 10/26/2005
Posts: 238
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I suggest reading VAN THARP Trade you way to Financial Freedom. This will get you on the right track.
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