How do you decide when to liquidate a position using technical analysis?

Trailing stop losses are an excellent way to let profits run. As the position moves in your favor, the stop can be trailed behind at a set distance. This locks in gains if the price reverses. Use larger trailing stops in strong trends, and tighter ones when momentum is waning. Look for signs of weakening momentum as an indication to take profits. Indicators like MACD crossing downward or overbought/oversold oscillators can signal fading momentum. Or a test of a key moving average line.

- Support and Resistance: Sell near these levels. - Moving Averages: Consider selling on a short-term crossing below a long-term average. - RSI: Liquidate if it goes above 70 (overbought) or below 30 (oversold). - MACD: A bearish crossover can be a sell signal. - Chart Patterns: Recognize reversal patterns. - Volume Analysis: Decreasing volume in an uptrend or rising volume in a downtrend may be a good time to sell. - Trendlines: Consider selling if the price breaks a significant trendline. - Candlestick Patterns: Look for bearish patterns. - Earnings and News Events: Consider selling before significant events. - Trailing Stops: Use trailing stops to protect profits and limit losses automatically.

I always look to see if my projected target hit a confluence of indicators - next resistance level, FIBO level, MA, MA cross, top or bottom of channel. If my projected upside or downside, coincided with several of those indicators, I would want to be out of 100% of my position by the time the price hit that level, as there would by many factors leaning against a further move. If the chart showed a vacuous move to a level far a way, I would scale my exits and use trailing stops to exit the position so I could maximize the profit. Leave room to sell the last piece near the high or low of the intended move, while ensuring that you have monetized enough of the position to have a healthy PL (b/w 2.5 and 4 to 1 risk/reward).

When your starting to lose sleep over any position. It’s time to get out . While stop loses on technical analysis can work as well. The key to all trading positions is can you think clearly at all times you have them. - don’t traded scared

The rationality in technical analysis is to early identify the trend reversal. Knowing this is to overcome the limitations of TA. At the same time - keeping a close watch on volume and delivery percentage is equally important. Now, trend reversal has two phases i.e. formation and confirmation. While the reversal is getting formed, stoploss becomes inevitable because SL allows one not to wait until conformation and thus to reduce loss (or loss in profit). Waiting till reversal confirmation eats away some gain and that is how traders cannot churn out the benefit of the entire trend and that's how it becomes the limitation of a technical analysis that it doesn't allow to take home full money as the trend should have produced.

A trade only qualifies as a trade once the following are defined: 1. Entry & reason to enter 2. Invalidation and a hard Stop Loss 3. Profit Levels Potential losses of every single trade should be pre-defined and there should be no emotions involved when it comes to taking losses. If the losses 'feel' too big or one is tempted to remove the SL: Probably the trade size is too big and the participant is over leveraged. Stop Losses shouldn't be negotiated. They have to be predefined and hard SL. Remember in trading - "The best loser wins". Be a good loser. Know the risk, and embrace the loss. Take the learning, iterate your system and win in the future.

Most often, when conducting technical analysis, it is done by examining the price trend movements. RSI and MACD are currently the best indicators for observing price trend movements that are relevant for future predictions. However, it is essential to implement stop-loss orders and employ effective risk management to diversify potential larger losses because, as they say, the stock market cannot be predicted.

There is not much to be said on top of the great contributions of fellow traders, only: never ever move your stop loss. Respect the decision you made when you entered the trade. If there is something wrong with the way you operate and you detect a mistake in your SL set, you may correct the strategy then. But once inside the trade: discipline is key to protect your capital. This is more of the psychology area but crucial.

In my experience, a profitable way to liquidate trades is using a proper risk reward ratio. The Kelly criterion is the popular method, which uses the 2:1 ratio while setting the stop loss and Target. If we are disciplined enough to stick on to this, in the long run it should be profitable. Also, effective monitoring as sometimes the market can be extremely volatile and the stop loss and target might be achieved. In those situations we need be careful and manually manage the trades. Trends can be useful when the initial conditions are not prevailing and our exit conditions are not valid either.

When it comes to sensing market conditions, Time is the biggest forward indicator. Lets learn this with an example. Lets say we took a directional trade and we are expecting the movement of the market to happen within a certain time frame. It would be within a trading session for a day-trader or maybe 2 weeks for a swing trader. Now if the price is not doing what its supposed to do within this time frame, a good trader would be alert about some underlying market condition changes that are causing this delay. At such instances, when a unknown market condition is changing (generally indicated by delays in Time), the best course is to cut off trades. Other conditions could be external news events, sudden market volume spikes, etc.

I use point and figure charting from Dorsey Wright and Associates, as it provides a longer-term trend perspective. Technical analysis for me is really used to confirm or question conclusions arrived from my fundamental analysis. As other contributors have suggested, if the technical analysis is not evolving like you think it should, this is an alert to go back to the drawing board and see what is it that you are missing that the market is currently seeing. It helps keep you honest, and forces you to look at the market through the windshield instead of relying on data that's already in the rearview mirror.

Adjusting to the new market condition takes a lot of understanding for a trader. It is good to be able to feel what the market is doing in general and not just stick to one pair or stock. Having an idea of what other correlating pairs or stocks are doing will let you know if you are late to the party or too early.

Losses give you important information that your strategy isn't working. It could be your timing or the overall market causing trouble. It's not smart to keep investing in something that's not doing well. If you do, it's likely because your pride matters more than the reality of the market. This rule is crucial to limit your losses. Unfortunately, many investors don't follow it. When things get tough and losses pile up, most investors make impulsive trades to try and recover quickly. This means they trade more or double down on losing positions to recoup their losses. Sometimes it works in the short term, but in the long run, it leads to big losses and trouble.

1. Ignore the media circus. This is almost never accurate. 2. Focus on sheer price action & indicators such as RSI. This is where all the real information is. 3. Fundamentals come second to price action. Don't expect your rock-solid company to perform brilliantly if there's a serious problem in the economy and the rest of the market is sliding. 4. Watch the whole market. Not just your one stock. There are various leads and lags. For instance, if you see small caps getting beaten up, chances are, your portfolio of big caps will do a little later down the line. 5. Adapt your framework and continually revise it as conditions reveal themselves. There is no shame in doing this.

We must never forget that technical analysis is the study of historical price movements, and there is no general rule that fits all asset classes, as each one has its own pattern that repeats itself. So we must study each asset class and try to see what worked in the past and use it in the future, not just apply the technical literature blindly.

Apart from Profit and Stop Loss levels, introduce time as a factor in your trade plans. If you are not already using it. Introduce the factor and observe how it will help you to sense the unknown factors. There are so many factors affecting the market, its impossible to keep a tab on all of them. But once you know, how time plays a role and it can serve as a leading indicator to some unknown factors in play. You can safeguard your investments and capital without having to know the exact change that happens but rather just sensing it ahead of time.

I believe good trading done well is a reflection of one’s innate disciplines and integrity. A sound mental approach to trading should equate to diligent profit taking, efficient risk parameters, and fundamental expertise on the asset. Beyond these skills, which are largely if not entirely based on market experience, one might consider fractal market dynamics. If a historical pattern repeats with high probability on an instrument, Benoit Mandelbrot’s fractal market theories suggest that the underlying’s price action will follow the structure of the pattern in an entropic manner. Knowing simple asset characteristics such as fractals may assist in risk mitigation from a purely technical standpoint.

I am a momentum trader, taking short term positions in the US Trading hours. My perspective on this: As soon as the trade loses momentum, it is time to exit. If it is a break out - then after a minor retracement, there will be a major move again. Re-entry can be made if one sees the momentum resuming. On the loss side - if the basis of the view on which the trade was taken has changed, then an immediate exit has to be taken. The above will NOT work, if one does not have a sound risk management system in place. No more than 1% risk on a single position. No more than 2% loss on a single day. It took me six years to implement a sound risk management system. I used to show compulsive [addictive] trading behaviours.

Investment is continuous process. Taking profit / cutting loss as part of asset allocation helps creat wealth. Complete liquidation from one script to another or one asset class to another only in case of increment of EVA. Economic value added risk adjusted quality of total investment.