Strategy for Exiting The Trade

By September 30, 2016 Newsletter No Comments

There are two strategies to exit the trade with profit. These are:

1. Based on Profit Objective

If my target is to make 20% on the trade then I calculate the target bid based on 20% profit and place Good Till Cancel Order. I also put the sell order for 20% to 25% profit when I don’t have time to calculate the target bid and the stock is moving fast. If I am out on the same day with 20% to 25% profit then I am happy. The target profit objective varies based on option price. For option contract trading at $6 and above my profit objective could be 10% whereas for option trading at $3 my profit objective would be 20%. In both scenario I am targeting $0.60 per contracts.

strategy for exiting the trade

2. Based on Target Price

If I am basing my exit on stock target price then I place my good-till-cancel order to sell one-fourth at first target, one-half at second target and one-fourth at third target. If the stock has not reached its target after certain number of days of its upward movement and showing sign of pullback then I go ahead and liquidate my position and lock my profit as there is always a trade waiting for me around the corner. If the stock is not doing its thing after certain days have passed then I try to liquidate the position at breakeven too.

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