In trading the money is not made in the entry, it is in the exit. The art of the exit is crucial to a traders success in the markets. Profits can disappear if you do not take them at the right time, small losses can become huge losses if you do not cut them. Small profits can become huge profits if you let them run until they truly stop. Keeping capital tied up in a trade going nowhere and just letting it sit there can cause you to miss out on other great opportunities.
So what is a trader to do?
- Use stop losses, only risk 1% of your total trading capital on any one trade, when you have lost that 1%, get out. Position sizing, stop losses, and understanding volatility is key.
- Enter trades right at break out points to new highs or off key price support levels or key moving average support levels. If it loses that support later and fails to retake it quickly then sell it.
- Buy when a stock is one ‘R’ multiple above a key support level, sell if it falls back and loses that support level. (One ‘R’ multiple = 1% of total trading capital).
- Use a ‘stale’ or ‘time’ stop: Set a time limit on how long you will give a trade to move a certain amount, if it fails to move enough fast enough, get out.
- Volatility stop. The market or your stock has a big expansion in its daily price range or starts moving against you the full daily range. You either cut your position down in size or get out due to increased risk.
- You trail a stop loss behind your winner, when it reverses and hits that stop you sell. A trailing stop can be a moving average or a percentage you your gain.
- You sell your position because you have found a much better trade with a better probability of success or a bigger upside.
The key above all else is always to have a plan to get out of every trade before you get in. Before each trading day begins think about what you will do based on the price levels your open trade is at.
Discipline is paramount for success over the LONG term. Every trader has a limited amount of capital (money) available to trade. The trader without discipline will make trades, be quick take the profit when he is right, and call his trade an investment when he is wrong. 
A GOOD Trader WILL: 1. Always wait for the setup: No Setup-NO Trade. 2. Knows that winning trades work almost right away. 3. Never takes a big loss. Sell it and start over. 4. Takes small loses regularly. Winners will come. 5. Lets the stock keep working until it does NOT! 6. Is eager to sell a loser, NOT a winner! 7. Buys pullbacks/patterns on the strongest stocks. 8. Will always trade small so he is not emotional. 9. Takes responsibility for his own trades.
Traders like to think that they only need to be accountable to themselves in order to get the best out of their trading. But it has been my experience that most traders fail miserably at this task. So why are traders not able to do this?
Are trading losses often followed by further trading losses? Do you end up losing money in ‘revenge trading’ just to regain money lost? Do you finish trading prematurely when you’re up money, failing to exploit a good day?
“Discipline in executing each and every trade according to your trading methodology is the secret to your success. If you want to improve your trading, what you need to do is very simple. Before you enter any trade, imagine that you will have to explain this trade to a panel of your peers, by explaining to them the reason for your entry, your money, trade, and risk management guidelines, and why you exited the trade. Imagine having to explain why you chose this particular market and this particular time frame, along with how you set objectives for the trade, and how you determined where your initial protection would be. If you can truly do this, I strongly believe that you can be successful.