What exit strategies do you guys use? It is one thing to enter a position, but exiting is something I believe you should already have decided before entering. What I tend to do, is exit too early and sometimes miss the big move, and when using proper stop losses like one should, it is vital to catch the big move.
Not sure if this is a god thing and any critism welcome but on shares i use a 10% trailing stop loss but I am scared of the automatic trigger so I use the alert and manualy sell I try and stick to this as i have been burnt in the past I have found that 10% allows for some medium corrections and allows me to see the growth without getting in and out. What I also do is monitor huge spikes in price and I may make the call to get out if i clearly see market seniment driving the share price up beyond what i think is fair value I then also look at total volume and trade size. I like the KISS system "keep it simple as i am stupid"
This is what works for me so far: Warrants: monitor the share by using alerts, I'm only inclined to trading underlying shares that have large intraday variances, so I sometimes buy & sell within hours apart. CFDs: I set a trailing stop, but I've burnt my fingers last week with FSR (didn't know this but, if you have a stop on the CFD but later sell, cancel the stop else you'll short automatically). So from this week on my trails are wider (1.5% - 2%). I work for a fixed minimum profit, so if my trade reaches that level I sell half and tighten my trail a bit if I still see potential gains. Shares: No longer trade those, I find their opportunity cost is too high. When I used to trade them I'd hold for few months so I only used alerts. I feel getting in knowing when you're comfortable leaving helps. Sometimes I take a quick trade to recover some small losses and to keep my brokerage buffer good
Having a stop loss based on a set % or set R will result in you being stopped out 9 out of 10 times ignoring trend etc which means you will miss making the most of any move. In my opinion you need to have a stop that respects price sentiment and action......in other words only exit if price closes below a certain marker that tells you clearly your current trend is in trouble ...eg: in an upward move a close below the 20EMA would be a clear exit for me.....however a 20 oint retrace to the ema should not stop me out as price often reverses off key markers to continue in the direction of the trend.
I prefer to trade top 40 shares and start with a 10% stop loss, as soon as the share moves positively thru the 10% profit I tighten the s/l to 7.5% and 20% profit to 5% s/l. But at any time if it drops down thru the Bolinger band I watch it like a hawk!
If a stock is outperforming the market - let it ride. Useful indicators for determining is the relative strength vs index, ADX is also useful). If a stock has way outstripped its EMA (read elder's theory on bull pull) then take profit and enter back at the ema. I have back tested trailing stops extensively - and have always come to the same conclusion - it is better to take profit than to get stopped out. But again, if you are sitting on a winner, let it ride.
Na, you can still apply rules. If ADX > 25 - let it ride. If Rel Strength > index, and index EMA(5) > yesterday's EMA(5) still in uptrend, let it ride. If ROC > 5% after several up days, and volume > MA volume, take profit. If ROC > 5 after consolidation period (characterized by a channel breakout - let it ride. Naturally, profits should only be taken after a set target level is reached. The problem I have with trailing stops - is that they inveriable stop you out right at the perfect next entry. One thing is absolutely critical though, if you have decided to let it ride, let it ride - cold feet is a killer.
I use a multiple of the average trading range of each share to determine a trailing stop loss for that specific share. By using a fixed percentage on all shares you are ignoring the fact that shares differ in trading ranges. This will result, that you get stopped out to early or to late, not all shares behave the same.