The Dale correspondence, part 4:
When to sell: objectively speaking, this is the easiest part of trading my system. Subjectively speaking, selling is the hardest part of trading any system.
But here are my rules for selling:
-sell when your stop loss is hit (always set a stop loss as soon as you purchase a new issue...never use "mental stops", always live ones). I usually set my stops at 8% when the market is hot. Right now I'm setting them between 4% and 5%.
-sell when the price hits your price target. I usually set 2 price targets, and when the first one is hit, I re-evaluate and consider holding out for the 2nd target. Again, it depends too on the market. Right now, one target is enough for me to sell. Price targets are determined by chart patterns (top of price range, base of triangles, length of flag pole, etc.).
-sell when Stochastics cross and dip below 75. This is important, for many times they will cross above 75, or kind of "mingle" with each other, but stay above 75, and the price continues to rise. Wait until they dip below, then sell.
In short, the purpose of selling is to bank your gains. Befriend the Trend Trading will never boast of "3-baggers" or 50% gain in 12 months. We are looking for 5% to 10% per winning trade, 2 to 3% per week average, and winning at least 7 out of 10 trades. You can go a long way on that kind of return.
Hope this helps (I was looking for a good opportunity to summarize my system, now that I am back in the game).
Good luck, and keep posting with any questions, TC. |
