But before that,let me say this........ Stock market,as you already know,is a matter of uncertainity. What we all try to do in the market is to keep the odds in our favor. And to do that,we implement different techniques-rumors,fa,ta,news,speculations etc.......
TA is one of the techniques that Traders use. It has good side,bad side. Like any other aspects of trading methods,TA is sometimes deceptive and unsuccessful in some aspects.Still TA has over everything else,as you can understand yourself now.Think how you used to trade in past,and how you see trades at present.........
There are several stages that you are going to go through,after you start your journey in TA world.......One of them is you would sometimes think,you have known all aspects of TA and now you are ready to profit. But later you will realise,your ideas are not enough. Again,you will see,you don't believe TA from the bottom of your heart.So,you don't trade depending on your trade decisions. Again,you will see oneday that you can't just trade without TA. You will lose everything without your chart.You will get addicted to it.You will realise traders around you are simply fools,because they are trading the wrong thing at wrong time.....
At a certain level,you will realise that you have to do things on your own.You will then develop your own strategy,though you may test and try to understand other traders's strategy.
Then,oneday you would realise,it is your mind that is disturbing you,that should be controlled,and disciplined............Well,you then become a real TA.........
Why I have written all those has a reason...........
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A good entry will surely give you a lot of comfort. But a good exit will give you a sure fire kind of profit. A planned,disciplined,and tested exit will save you from going to hell........And exit is as important as entry..........And actually,trading can be divided into three catagory from TA's point of view : 1. Entry. 2. Holding. 3. Exit.
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Exit itecan be divided into several things. For example, 1. Stop loss. 2. Trailing Stop.
Now Stop loss is your initial exit level,if the trade doesn't work or fail.........Usually,experts recommend 7% to 8% of your invested money in a bought stock to be your stop loss. It means if you have bought a stock with 10,000 taka,you have to sell it at 9300 taka with 7% loss. I have found that 10% loss is a good percent for stop loss in bangladesh.....
I personally bet 10% on each trade. So,10,000 taka is my tolerant level for each 1,00,000 taka.
Now the question is why such a technique. The reason is simple. As you are a chartist,you know when to enter. So,let's say you entered five times into a stock. You lose 10% in three,but gain 30% in two. So,you are having 30% profit in total. This is an interesting trick.
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Now the trailing stop/exit part. Well,like I have always said,I use two trailing stops for taking profit. Surely,if you follow trailing stops,you sometimes will have to lose some profit. It is because,you have to give some chance to the stock to go up. So,you have to lose your trailing stops. Please,go back to a stock's chart. And see that if you use tight stops,you will get out of a stock very quickly.
You have to aim at big profit. Yeah,"YOU MUST TRAIN YOURSELF TO GAIN BIG PROFIT".
The trickiest part of trading is to hold and to take big profit. Sometimes there will be so sever pullback that you will panic.But selling in that panic will deprive you of big profit.......
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Now let's see a real example. I trade this in real. And I am going to write how I traded here........
Entry :
There was candlestick buy signal at first. See the yellow box on the candles. Then,there was a buy signal by the software. I entered the later day at 1483 taka. I went on buying on later days.
My stop loss was 10%.
And later days,I saw I didn't need that stop anymore. Because I was out of risk............
Exit:
Now I got concerned around 2306 taka,though I was "trying" to follow the long term trailing stop. Because market went gloomy at that time. And ABBANK was at resitance point. So,I sold more than half of my holdings following the short term trailing stop,which is blue here.............
Then,I rentered in ABBANK at 2370 taka,following another buy signal,volume and breakout. And again,I was following the sea green color,which is a long term traling stop line. However,AB again lost its strength around 3000 taka and started to create red candles.........So,I exited at around 2900 taka. This exit was based on not only trailing stop,but also on Candles,volume! I circled my exit in white box..............
But see next buy signal. I entered into it,but realised that it was a wrong entry.I tried to exit,but had a lose of 8%. I took the lose. And see AB's chart of later part.It feel nearly 30% more............
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Now when do you take profit? The simple rule is going with the Trailing stops,trading with your own nature,and staying with the trend.........Trend is a very important factor. As long as trend is up,you should be very aggressive. But when the trend is downward,you must be watchful,cautious........
There is a very important thing that you have to discover. And that is nature. You would notice there are some traders that don't have difficulty holding a stock for long.But there are some that have real difficulty to hold a stock for long.They are comfortable holding stocks for short time...........
Find out your nature of holding...............
In short,let's summerise :
1. Don't base your profit taking completely based on candlestick.But be on alert when candlestick sell signal appears.2. Always be prepared to take some profit at resistance level. But don't think resistance level is the end of everything.3. Always be watchful at fibonacci levels.Because prices do change direction at fibo levels.4. Always stick to your trading plans,whatever happens..5. Always believe in Trailing stops,even if they look ridiculous,absurd and confusing.6. Always develop your own style of trading,and believe in it from the bottom of your heart.7. Always try to buy a stock at the bottom,not at the top(whatever happens),unless there is clear breakout with high volume.8. Give a stock time to give you profit.9. Be on alert when a stock gets oversold by indicators like Stochastic,RSI,MACD. But don't sell at oversold situation,unless you are too confirmed of reversal.Use Oscillators for enterting a stock most of the time.10.In the end,again,believe in trailing stops.They do work.11. Practise,practise and practise in past of stocks. Give yourself time to understand what is going on. Oneday you would realise you are becoming like a robot,machine in trading. And that is a good sign.
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