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There is no right answer for how to exit a trade, profitable or not.
Cutting profits short certainly does not make sense, but some people do
not have the patience to stick with a position for days or weeks on end.
Then, it is better to cut it short, than to watch it move into the red.
Everybody has to have a trading style that they are comfortable with,
but a habit of setting a given profit target is a mistake.
As for where to set stops, that is a different story. If we had a
bottomless pit for money (meaning there would be no reason to trade
anyway!), then most systems work better without stops (THAT DOES NOT
MEAN THAT THERE IS NO EXIT STRATEGY). If you are trading technically,
there should be a reason why you are exiting. Maybe you reached a price
objective. Maybe, even though prices have moved in your favor, the
Elliott Wave pattern is not developing in a way that will lead prices to
your orignial objective. Maybe you believe we are in a downtrend and RSI
shows overbought. Or maybe, a trendline broke.
Of course trailing stops can work too for those with an itchy trigger
finger, but if what got you into the original trade is still valid, you
might want to look for a re-entry point (that has a decent risk reward),
below your just exited level (assuming the original trade was a long) so
you have a chance to let the profits run after all.
I do not think a priori, you can set a standard deviation stop, or say
you are going to trail stops by "x". You must see how the market is
trading and why it is doing it. You need to have a plan and have
discipline. THERE IS NO SINGLE SET METHOD FOR PLACING STOPS.
Steve Poser
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