You are a swing trader. You go long at 50. Two days later the stock is up 2 points. Two days after that the stock is at breakeven. (you usually risk 1-2 points per trade, you typically look to make 2-4 points per trade) Here's the Question: If your premise for entering the trade is still intact and valid, do you close the position at breakeven, so your "winner" doesn't turn into a loser? Or Because your premise for entering the trade is still valid, you keep the position with your stop and give the stock more time to do it's thing? (let's not complicate this question, so this thread doesn't go off topic). So, using JUST those basic facts, what's your opinion?? Thanks, gotta_trade
Good question. If the setup is still there, I can't see closing the trade because you'd be entering it otherwise, no? But other than that, if the trade did it's thing and I went to a BE stop and the trade went to BE, I'd exit. I'd exit because the trade had already time to establish itself, so I'd rather get out even and look to the next trade then get married to the last trade. If my strategy didn't call for me to be at BE at that point, that's a different matter. You're gonna get out and see the trade turn way profitable sometimes, and other times, you'll be so happy you got out flat. So don't look back unless it turns out that you're never happy that you got out flat.
Wow, did I get lucky, and it only took 1 response. I will incorporate those points into my swingtrading strategy. Thanks
Also note that sometimes you are buying on a b/o (if that is what you do), and the stock will run a few points and pullback to test the b/o, which is usually the breakeven for your entry. That is normal market action, and if the setup was still valid, I would stay in... If you find this happening often, I would increase my share size and take profits on a partial of those shares at a designated area (ie - up 1.5 points). That will give you room to let the rest of the shares trade - ie pullback and wiggle a little before taking off again.
You answered your own question. -2 or +4. Not 0. Stick with your method. Your method may call for exiting early if you see certain signals. Make sure you've got those written down before the trade. Otherwise you might find yourself 'inventing' some while the trade is on. In my own method (for NQs), I move my stop to breakeven after 6 pts in favor. I exit after a predetermined profit (25-35 pts). Period. I don't care if God himself tells me otherwise while the trade is on. I don't think even He can predict the future.