When to exit from a position
When to stop loss and take profit. In other words, when to exit from a position.
I believe this is an interesting topic which many would want to learn more of, myself included.
There is no hard and fast rule and the conditions also differ between trading and investing so I will try to write some general points for sharing purpose.
Generally speaking stop loss and position sizing are inter related. If I may add, try to limit the stop loss to maximum 1% of the portfolio size.
It also depends on the trend.
E.g. if the price is above 200 ema on daily chart, trend is bullish.
Identify an area of support where the price could retrace to.
Identify an area of support where the price could retrace to.
If the price retrace to that area, wait for a higher close.
If price closes higher, enter at next open.
Stop loss at low of the candle.
Take profit at swing high.
Other technical conditions that I refer to include:
1) Exit when the price moves into an extended technical state such as a series of vertical bars in the 60 min chart or price could pierce the 3rd or 4th standard deviation of a top or bottom 20 day bollinger band.
2) Exit when price hits a major trendline or previous high / low.
3) Exit when crossovers signal potential trend changes.
4) Exit when price hits upper bollinger band and RSI hits overbought (above 70).
Of course, these are more for short term trading use.
For long term investing, I would consider to exit a position if:
1) If the counter has declining financials over 4 quarters. I.e. the fundamentals have deteriorated.
2) If insiders or mega funds are buying to push up the price, I would sell half or more when the market price shoots >20% above their buying price. When the profit taking settles, I would accumulate near the funds' buying price and wait for the price to move up again.
3) Macro environment changes.
Hope the above are useful sharing for my fellow moomooers.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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Bought my first stock in 1996. Still learning today.
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toomanyscammers : are these insights from your years of experience or research? I found some of them insightful, thank you.
GT1982OP toomanyscammers: It's a mixture of both. Some of them were learned from fellow investors and found to be useful to me which became part of my experience over the years.
That's why learning is a never ending journey. I'm still learning from other investors like yourself today.
toomanyscammers GT1982OP: thank you. and now my turn to apply your tips of using the increase/drop in closing price to assess if a stock is worth re-entering. :) thank you . though it's possible that the stock rises abit after a downward resistance and then subsequently still drops thereafter yes?
GT1982OP toomanyscammers: Yes definitely possible.