It’s not about having the perfect strategy.
It’s about the rule you abide by with each trade.
One of the biggest issues facing all walks of traders is a severe lack of discipline and structure in stock buying habits. Many fail to use stop losses, or even protect gains with a simple trailing stop loss strategy. Others risk far too much.
Others aren’t so sure when to jump out of a trade. But that’s actually the easy part.
For one, don’t be greedy. Two, don’t get caught up in the rush of herd mentality.
Three, keep your eye on specific technical pivot points, including Bollinger Bands (2,20), MACD, relative strength (RSI), and Williams’ %R (W%R). When they tell you to get out of a trade, get out of the trade.
Look at small cap stock, Fate Therapeutics (FATE), for example.
Notice what happens whenever the stock hits or penetrates its upper Bollinger Band (2,20), as RSI hits or penetrates its 70-line. Or, notice what happens when we combine a big MACD northerly spike into the mix. Or, look at what happens to the stock when Williams’ %R jumps to or above its 20-line.
Not long after –nearly 80% of the time- shares of Fate Therapeutics pulls back.
It doesn’t matter how hot the story is behind FATE, when the technical pivot points tell you to jump out and wait for a pullback, jump out and wait.
This is one of the best ways -in my opinion- to know exactly when to jump out of a trade.