Exiting a trade
How not to loose too much of your trading capital.
Upon entering the trade, if you place a sell stop below the market if you're long (buy stop if you're short), you know right away how much money you will lose in any given trade. You should never trade without employing stops. Thus, you should never be in a trade and have a losing position and not know where your exit point is going to be.
How to lock in larger than normal PROFITS in a winning trade.
You should always stay with your profitable trades as long as possible because the trend is likely to continue and make your profits even larger.
This is easy to understand but not so easy to do when real money is involved. The difficulty is that although your profit may become much larger if you stay with a trade, it may also decrease and even disappear. Human nature is such that it values a sure profit much more highly than the probability of a much higher profit. Thus, traders are inclined to take their profits too soon which can be fatal to long-term success because big profits are necessary to overcome the inevitable collection of small losses.
There is a good way to let profits run while still guarding against the possibility that prices will turn around and take away much of your accumulated profits before the trend actually reverses. It is called a trailing stop. You include in your plan a method for moving an exit point along some distance behind your trade. As long as the trend keeps moving in your favor, you stay in the trade. If the market reverses direction by the amount of your trailing stop, you exit the trade at that point.
A trailing stop moves to lock in profits as the trade moves in the traders favour, it should never be moved backwards. There are many different ways to calculate a trailing stop:
Volatility - the stop is calculated as a percentage of the average true range of x periods.
Rupee Amount - A set amount determined before the trade is entered.
Channel breakout - exit a long position at the low of the last x bars.
Chart patterns - ie move the trailing stop behind each consolidation as it forms.
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Best Wishes!
Traderji
Syschem has some resistance here at 7.70-7.80 area,after which next resistance is after 12 area.....so trailing stops the only way.Keep stop loss at the low of previous day i.e 5.75.
