| From: dabum3 | 2/24/2007 4:35:42 PM |
| | 3 Recommendations Read Replies (1) of 13441 |
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MORE ON EXIT STRATEGIES ... Some of you may recall that I took a position in ICE back at $80 and change with a profit target of $120. I took my profits at the profit target and never looked back. However, price has continued higher and some people just don't like leaving profits on the table.
There's a strategy that allows you to stick with the trade and minimize risk, while taking advantage of stocks like ICE or PCU, that keep heading higher.
The strategy is called tracking the lows.
You can track the daily lows for short term trades or track the weekly lows for intermediate term trades.
This means you sell part of your position once price "closes" below the previous week's low of the week.
In the example of ICE, instead of selling at my profit target of $120, I could have set a stop below that week's low before selling. Price moved up the next week, so I would then have moved my stop up below that week's low. Each week as price has continued higher, I would move the stop up to just below the previous week's low.
Now price is $61 higher from my profit target of $120. I would have earned an additional 46% in profits.
If still in ICE, I would now move my stop up to $157, just below last week's low. If price continues higher, I would move the stop up to just below next week's low. If price trades down below $157, I would then be out of the trade, having sold near the top.
Tracking the lows! A great way to take advantage of overbought situations where price continues to explode to the upside.
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