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EXIT in Trading

exit_strategy1Exit– The exit is critical to being a successful trader. Let your winners run and your losers run out quickly. Two factors determine your exit, the Target and the Stop loss you have set on entering the trade.

1. The Target is determined by the type of market and the trading history of the stock.

2. If the trade proceeds in your direction move the Stop loss keeping it tight.

3. It the trade continues to move, you may want to take your money off the table!

4. Profits should be taken before reaching a S/R. SO WHAT if it continues to run after you left!

5. Take Profits quickly and often! And remember discretion is the better part of valor.

6. The two most important factors in determining the Stop loss are the last S/R and providing enough margin for the trade to be successful. You must balance these against each other.

7. The Stop loss can be predetermined by your maximum loss limit but understand a small loss limit can positively impact your probability of success.

8. I must balance courage and common sense when staying in the trade. The money may be better used in another trade.

9. Remember small losses are the key to success in an environment where you may be wrong greater than 50% of the time.

10. Don’t give back, remember you can always get back in!

11. Don’t change my rules and therefore my settings.

Intuition Discipline Confidence Risk

Going back to the roots of what ‘risk’ is all about. As I suggested rereading Justin Mamis’ passage of ‘When to Sell’ yesterday, I did reread passages of ‘The Nature of Risk’ probably my all time favourite book which was also written by Justin Mamis. Here is a small excerpt. Enjoy!

Justin Mamis: ‘The Nature of Risk’ page 80:

Intuition although seemingly spontaneous, apparently emotional, stems from a form of “information” that has become built-in from past experience. Discipline means choosing what to do unencumbered by the fear of making a mistake. Confidence means trusting our intuition that what we “see” is what we “know.” There’s no escaping to the external, to the objective, and no standing on the shaky ground of emotions. So the question becomes, How do we create within ourselves the heroic condition of confidence wherein risk is not danger but life?