- Initialstop loss
- Establish in advance a maximum stop loss.
- The moment the price hits the stop loss, I sell the position without hesitation.
- Re-entry
- When the market experiences general weakness or high volatility, your stock can undergo a correction or sharp pullback that stops you out. However, a stock with strong fundamentals can reset after such a correction or pullback, forming a new base or a proper setup… Often, the second setup is stronger than the first. The stock has fought its way back and along the way shaken out another batch of weak holders. If it breaks out of the second base on high volume, it can really take off.
- If the stock still has all the characteristics of a potential winner, look for a reentry point. Your timing may have been off. It could take 2 or even 3 tries to catch a big winner.
- Selling at a profit
- Once a stock amasses a percentage gain that is a multiple of your stop loss, you should rarely allow that position to turn into a loss (e.g. stop loss of 7%, if you have 20% gain, move stop to breakeven or trail stop to lock in majority of the gain).
- When you have to close out a trade, selling into strength is a learned practice of professional traders. It’s important to recognize when a stock is running up rapidly and may be exhausting itself. Or you can sell into the first signs of weakness immediately after such a price run has broken down.
- Disaster plan
- Plan what to do if your Internet goes down, or power fails, or your stock gaps down, company investigated by SEC, CEO embezzled funds.
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