Use this strategy to exit positions
Most day traders are
familiar with the old day trading rule that tells you to “let your winners ride
and cut your losers short.” Well at DaytradeTeam, we’ve modified that
just a little bit. It goes something like this:
“Let your SLOW MOVING winners ride, and cut your
“TOO FAST” winners and all of your losers short.”
For an example, let’s take a look at a profitable
trade we had on Yahoo!
(
YHOO |
Quote |
Chart |
News |
PowerRating) today in our Live Day Trading Room:
Notice how within a few minutes of short selling
YHOO, the stock started to move lower very quickly. As you can see from the one
day chart, the down move was very “steep”, with the stock falling quite a bit in
a short amount of time. We refer to this type of movement as an “unsustainable
trend”, and the type of quick move in our favor that we like to take profits
into. Instead of “letting our winner ride”, we gladly cashed out of YHOO for a
0.5% profit in just a few minutes and moved on to the next trade.
When a stock is moving in your direction, “let it
ride” if the angle of the trend is a 60 degree slope or lower, and exit into the
sharp wave on big, sharp movements in your direction that look closer to 90
degree angles (almost straight up or straight down). This will allow you to
expand your profits on trades with well-controlled, sustainable trendlines and
cash out for quick profits on stocks with unsustainable rushes in your
direction.
Note that these same principles can be applied to
all forms of stock trading and options trading.
Andy Swan
Andy Swan created and
co-founded DaytradeTeam five years ago on a principle of empowering
individual stock and options traders with the techniques and analysis methods
typically reserved for elite professionals. His expertise in technical analysis
and commitment to educating members earned DaytradeTeam a top-ranking among
advisory services for several years.