Trade management is an aspect of trading that’s overlooked by many struggling traders. It’s difficult! Drawing squiggly lines on charts and recognizing patterns is a lot easier for most traders than actually managing emotions. When you are thinking about a trade and analyzing a chart, there’s no money on the line – at least not yet. But once your hard-earned dollars are wrapped up in a position, that’s when greed and fear give you all kinds of bad advice. Last week we talked about a trader who had trouble with entries; today we are going to look at exits.
On Monday, I traded $TSLA. It had been running up for a long time, had a downgrade, and it got destroyed. You see this kind of setup with some regularity. A high-flyer finally shows a little weakness and takes a big hit. Just last week, $NVDA did a similar thing (and we made money trading it!).
$TSLA gapped down after the downgrade, then it formed an ORB pattern and I took a short position at $247.30. So far, pretty straightforward. But if the trade goes the way I want, where should I get out?
To answer that question, you need to zoom out and look at the whole picture. Day traders are often guilty of being so focused on every little tick on the intraday chart that they jump in and out of stocks more than they need to. If you zoom out and look at the daily, though, you’ll see a very clear support area at the 50 SMA. After dropping so much already, it’s unlikely $TSLA can break down through that, so I have that as my final target.
Now, a couple important notes. First, you should be making that determination before you get in the trade. I had that support area spotted long before I entered $TSLA. Second, just because you have a target in mind doesn’t mean you ride the stock that far. You also need a stop loss and points for scaling out along the way (which I did).
All in all, it was a quick, profitable trade $1k profit for 20 minutes of trading. For more info on picking exits, check out this video! And if you want to learn how to trade like I do, email maribeth@bullson.ws about the 60 Day Bootcamp. It’s an intensive trading course that walks you through every aspect of my system!
