Exit is Important!

As a trader, you know that the art of the exit is crucial to your success in the markets. Profits can disappear if you don't take them at the right time, small losses can become huge losses if you don't cut them short, and keeping capital tied up in a trade going nowhere can cause you to miss out on other great opportunities. So what can you do to manage risk and maximize profits?

First and foremost, it's important to have a plan for getting out of every trade before you even enter it. Before each trading day begins, think about what you will do based on the price levels your open trade is at and where it may go.

Position sizing, stop losses, and understanding volatility are key to proper risk management. Use stop losses and only risk losing 1% of your total trading capital on any one trade through the placement of stops and position sizing. When you have lost that 1%, get out. You can also use a trailing stop loss behind your winner, when it reverses and hits that stop, you sell.

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, and sell if it falls back and loses that support level.

You can also use a 'stale' or 'time' stop, which involves setting 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. And finally, you can use a volatility stop, which involves stopping out if the market or your stock has a big expansion in its daily price range or starts moving against you the full daily range.

Remember, the key to success in trading is having a plan for every trade and sticking to it. Don't let emotions cloud your judgement or cause you to make impulsive decisions. By using these exit strategies and managing your risk effectively, you can maximize your profits and minimize your losses. Happy trading!

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