One of the most important aspects of a successful investor is an exit strategy. Knowing where to admit you’re wrong and getting out of the position can save you a lot of money and stress. My exit strategy in brief, is to place a sell stop immediately after I enter a position. The sell stop should be placed below as much support as possible, but still within your risk parameters. Using the example below the stock was bought at around $24 as it broke out above resistance. Then, the sell stop was placed below support represented by the dashed line. The previous lows, or the support, was at $21.75, less than 10% below the entry price. The stop was placed a few pennies below support which allows for the stock to come down bounce off support and you will maintain the position. If the stock comes down and breaks below support then your sell stop is triggered and you immediately sell at the market. Click on the chart below to enlarge…
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