Okay, you've placed a position in the market and you're making money. Alright, when do you decide to take your profits? Here's an example of a simple strategy to help you decide when you should exit your position.
To illustrate, if you're 'long' and the market hits a 21-day low, you exit. If you're 'short' and the market makes a new 21-day high, you exit. This stop is recalculated each day and it is always moved in your favor so as to reduce risk or increase your profits. This exit strategy produces above-average profits when traded with sufficient money.
Be aware that this exit strategy can far and away make you more money than the buy-and-hold approach. Drawdowns can be significant using this approach; however, position sizing and diversity can significantly reduce drawdowns.
Hi.
ReplyDeleteI know it sounds strange but I'm a 18 year old stock market investor from Iran!
you followed me on twitter @Hatef and then i had the pleasure of visiting your blog.
I managed to convince the most talented high school students in the city to come together as an economic team in order to begin investing in one of the world's most troubled stock markets!
I shared my ideas about the process of developing as an investing team and then we started planning. now after intense hours of studying the stock market rules and strategies the outline is ready however we are changing and correcting that everyday attempting to make it more detailed because everyday we learn something new!and we are going to keep studying and working hard for what we really believe in.Finally in our PRACTICAL TESTING period which started last week we made a profit of around 2% which is not great but satisfying we will improve it for sure.
Anyway the reason I'm telling you all these things is that our team is grateful for McGraw hill publications for many American stock market experts who just shared their stock market experiences in an honest way and for the bloggers like you who take the responsibility of informing people not only in US. but also all around the world.
SO just keep on writing and thank you!