Those of you who read my blog frequently know that I spend a great deal of time thinking of ways to help people increase their trading profits. I spent this weekend thinking about the best way to show / teach people to use my Profitable Stock Exit Strategy Tool to improve their trades. Then it hit me!
An Live and Unrehearsed Demonstration Using the Simplest Entry Strategy Possible
As I said in the exit strategy video, it has been said that a systematic exit strategy will lead to better and more consistent profit margins than an entry strategy. I personally don’t exactly agree with that premise, as I like to use high quailty entry AND exit strategies, but I’d like to prove that exit strategies work.For this demonstration, I picked 3 long and 3 short stocks using the simplest method I that could possibly work (or at least that I could think of).
How I Picked The Long Positions
I went to the Prophet.net Sector Rankings, and chose the long stocks from a sector that has a high, positive Rank Change, as was in the top 10 Sector rankings. In this case, I chose Property and Casualty Insurance: 
I then went to ClearStation, and looked up that sector, and ordered the stocks by RSI. I filtered out stocks under $5 and that trade (on average) less than 250,000 shares per day:
Based on those criteria, the long positions I chose are
How I Chose The Short Positions
To chose the shorts, I basically used the same concept, except I chose a sector that had a small negative rank change, and was in the bottom 30 ranked sectors. For this example is computer peripherals. I then went back to Clearstation and chose stocks in the Electronic Instr. & Controls sector, and I came up with:
Position Size, Profit Targets, and Trading Strategy
For this example, I’m setting a position cost limit of $2500 per trade. The number of shares purchased will be $2500 / current price.
Profit targets have been set using chat patterns, fibonacci, and is some cases, P/E ratios. If you want to see my technical anlsysis of the charts, please email me, and I’ll put together the snapshots.
The trading strategy is very simple.
- I will set trailing stops using the Chandelier Stop approach
- The trade will be kept open until the profit target is reached, or it gets stopped out
- If the trade is not profitable within 10 trading days, it will be closed
- As the trades become profitable, I will adjust the Chandlier Stop to a more appropriate multiplier of ATR. Which multiplier is used is up to my discretion
- Once the profit target is reached, I will sell 1/2 of the position. The other 1/2 will be left open, with a stop placed at a 1.1 ATR Chandlier Stop. The trade will remain open until stopped out
Position Particulars
RDN
Type – long
Entry Price – 11.79
No. Shares – 212
Profit Target – 17.63
Initial Trailing Stop – 9.25
HIG
Type – long
Entry Price – 28.62
No. Shares – 85
Profit Target – 38.2
Initial Trailing Stop – 24.22
MTG
Type – long
Entry Price – 7.99
No. Shares – 313
Profit Target – 14.14
Initial Trailing Stop – 6.19
ENER
Type – Short
Entry Price – 11.92
No. Shares – 210
Profit Target – 10.06
Initial Trailing Stop – 13.93 (Channel Stop)
NVEC
Type – Short
Entry Price – 54.26
No. Shares – 99
Profit Target – 45.52
Initial Trailing Stop – 61.97 (3 atr)
AME
Type – Short
Entry Price – 35
No. Shares – 71
Profit Target – 31.68
Initial Trailing Stop – 37.41
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Tags: exit, sell, stock, stop, strategy, tool, trailing
