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Once you have a gain of $2 per share or more, set a trailing stop at $2. In other words, if you have a gain of $4, you will risk $2 and protect $2. If you have a gain of $10, you will risk $2 and protect $8. |
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2. Pet the lows. In this method the trader sets a new trailing stop each day at the low from the previous day (or at the high if he or she has sold short). This method can create quite large risk, but has been proven to produce terrific profits in trades that are running your way. |
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Never hold a loser overnightnever hold a loser overnightnever hold a loser overnight. Any questions about this one? |
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Weak (or strong) close. Exit your position at the end of the day anytime the stock is poised to close in the bottom 25 percent of the trading range (for a long) or the top 25 percent of the trading range (for a short), which would signal that the other side is starting to gain control. |
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Gaps. If you are holding your position overnight and it opens with a gap of 3/4 of a point or more from yesterday's close, you should get out of your position if: |
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Long position: it is a gap down, the gap holds, and the stock goes on to make a new low after the first 30 minutes. |
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Short position: it is a gap up, the gap holds, and the stock goes on to make a new high after the first 30 minutes. |
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Time's Up. When you enter your trade, you have a time target in mind, generally one to three days. If after four or five days, at the most, your position has not reached its profit objective, close the position. You cannot afford to keep your hard earned capital tied up in a nonproductive asset. |
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Every book, every seminar, every class, every videotape, every other form of teaching material you can think of, has a section devoted to "The Very Best Trading Rules Ever!" |
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