The approach is simple; first sell the half of your position if share price hits the low of last 10 trading days, and another half if it hits the low of last twenty days.
Fine, that was for your accumulated profit position on a long term trend. But what if you have identified a long term trend and you wants to initiate a position in it. A step wise approach will look like this:
Initiate the trade with a stop loss at the most recent support level. If you don’t get stopped out in the first instance itself, and the stock starts rising, convert the stop loss to the low of preceding 10 days if this 10-days low is above the first stop loss. (It is quite possible that it may take some days before your 10-days low get above your entry price. You have to remain patient if the trend is intact, and the movement is slow) As the trend continues, and 20-days low also comes above your entry price, just keep tracking your preceding 10-day and 20-day lows. On the signs of any correction, sell half of the position at the 10-days low stop and the remaining half at the 20-days low stop.
All that was for long term trend based position! But if you have initiated a position that is on short term, and is based on any event or news, save your profits by “Two and Four Low” approach. Sell half of your position, if price comes to last two days low stop, and sell another half if it comes to last four days low stop.
Last but not the least, a very important tip for you!
At sometimes, you get out of the winning trade on account of market correction, only to see the market rebounding and going higher. That’s painful if you are clueless whether to enter the trade again, if the trend is revived. There are two ways by which you can make the entry. First, if the stock reaches the next new high, get in with the stop loss at the low of the last three days or the most recent support level, whichever is higher. OR second, buy if the RSI changes from 30 or below and crosses 50, placing the stop loss at the three-day low.
Fine, that was for your accumulated profit position on a long term trend. But what if you have identified a long term trend and you wants to initiate a position in it. A step wise approach will look like this:
Initiate the trade with a stop loss at the most recent support level. If you don’t get stopped out in the first instance itself, and the stock starts rising, convert the stop loss to the low of preceding 10 days if this 10-days low is above the first stop loss. (It is quite possible that it may take some days before your 10-days low get above your entry price. You have to remain patient if the trend is intact, and the movement is slow) As the trend continues, and 20-days low also comes above your entry price, just keep tracking your preceding 10-day and 20-day lows. On the signs of any correction, sell half of the position at the 10-days low stop and the remaining half at the 20-days low stop.
All that was for long term trend based position! But if you have initiated a position that is on short term, and is based on any event or news, save your profits by “Two and Four Low” approach. Sell half of your position, if price comes to last two days low stop, and sell another half if it comes to last four days low stop.
Last but not the least, a very important tip for you!
At sometimes, you get out of the winning trade on account of market correction, only to see the market rebounding and going higher. That’s painful if you are clueless whether to enter the trade again, if the trend is revived. There are two ways by which you can make the entry. First, if the stock reaches the next new high, get in with the stop loss at the low of the last three days or the most recent support level, whichever is higher. OR second, buy if the RSI changes from 30 or below and crosses 50, placing the stop loss at the three-day low.
1 comment:
An excellent writeup and a good trading stratgey, even for people like me who get there bread and buuter from stock markets for trading strategies on nifty options and what the Dow Jones is likely to be visit www.niftywhatcanhappen.blogspot.com
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