There are only 2 principles upon which all the exit strategies are formulated
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1.Exiting on Weakness – Positional Trades
Ride the trend till it lasts.
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Use a trailing stop loss to stay in the trade for maximum time.
As long as trend is strong,
price won’t hit TSL rather it would move steadily in the direction of the trend.
When the trend loses its strength,
it breaks the TSL where u exit ur holding.
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Few Common methods of TSL are
-Short term moving average such as 30 EMA
-ATR based Methods such as Chandelier Stop/Super Trend
-Break of last Swing low, in uptrend/ or last swing high in downtrend
-Parabolic SAR indicator
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Pros on the methods are squeezing the maximum profit from the trade. Big wealth creators are found and ride this way even for years.
But this is emotionally very challenging to hold one trade for years & many traders aren’t psychologically adaptable to do it this way.
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2.Exiting On Strength – Short term trading such as scalping or day
Scrips are chosen based on high momentum in short term in the past. Betting on its continuation at a faster pace, a trader sets his target already when he enter into his trades.
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Common methods to fix the target
-Floor pivots.
-Fibonacci levels
-Supply/Demand zones
-Important levels from previous day such as PDL, PDH etc.
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One advantage with this method is that
risk/reward in the trade is already determined in all the trades,
be it loser or winner.
It takes out lot of emotional stress in trading.
But disadvantage can be cutting a potential big winners into comparatively smaller ones
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