How to Exit Winning Trades - Part 1
Developing a smart action plan to exit open winning trades early and often can help traders identify smarter, more flexible ways to manage both their entries and exits, says veteran trader Ken Calhoun of TradeMastery.com and DaytradingUniversity.com.
Given the recent record-breaking new highs in our markets, it’s time to consider how to lock in profits for open winning swing and position trades, before the market drops. In this series of articles, we’ll look at how to use easy-to-follow trade management tactics designed to help traders get out of trades at the earliest signs of weakness. The goal is to scale out of trades in two exits, like industry professionals do, so that profits are realized at two sequential price regions.
Scaling Out of Winning Swing Trades: Your Two-Step Exit Plan
As markets continue to rise and share prices climb, it’s a smart idea to lock in gains before the market takes back a large part of unrealized open profits. New traders often miss out on breakout rallies, only to buy near a top, entering too late. Or they stay in winning open positions far too long, using trailing stops that are too far away, needlessly sacrificing unrealized profits during market reversals and broken trends.
An old Wall Street saying is that “markets take the stairs up, and an elevator down.” Meaning, as we’ve seen in the S&P and NASDAQ markets, the first few months of 2013 have been characterized by a strong, steady slow climb.