Aim of a trader is to make profit for every trade. Before entering every trade the trader should have clear goals on the stop loss and target.
In some situation after entering the trade, technical indicators or fundamental news may push the stock in the direction favorable in the trade. In such situation smart traders would like to take bigger profit than initially thought. Therefore the trader should increase the profit target.
But at the same time, its traders job to protect the profit made in the trade. This is done by continuously increasing the stop loss to higher level. There are many different ways of upping the stop loss. Some of them are:
1. Increase stoploss to a x% below the highest price the stock has touched. Value of x can be as low as 0.1 % to 10% depending on duration.
2. For short term trading: Stop loss can be the previous day closing price of stock. This will give cushion of any whipsaw.
3. A rising moving average: As the stock moves upward, its moving average also moves up and provides good support level. A trader can use x % below 15/20/50/100/200 Day moving average as their stoploss level.
4. Important support level.
5. Bollinger band.
And many more. Use the one you are comfortable with.
Example will follow soon.
Total Comments 1
| Posted by Guest |
Posted on: 07-Nov-2013
|Very useful site|