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How To Exit Winning Trades Part 2

By  +Follow June 19, 2013 9:00AM
Tickers Mentioned:

In the first article of this series, we identified the correct exit in the market at near the exact top (within 1 day of the multi-year high), designed to identify timing for exiting open long swing trades using the S&P chart. We also discussed the importance of scaling out of open winning trades in two steps, to close initial entries out over time, at key sequential support levels. In this second article, we’ll look at closer technical exit signals for swing trades, with unique examples.

Scaling Out Of Downtrending Swing Trades: A Tighter 2-Step Exit Plan

In the first article, we looked at both 4- and 8-day support levels as exit signals. To extend that trading strategy, we now look at the special case where a swing trade is starting to exhibit signs of a downtrend, as defined by lower price action compared to a prior day. The goal is to start tightening in trailing stops to lock in gains at the first sign of a trend reversal.

In Figure 1 Calpine Corp. (CPN), we see that a downtrend has started to form midday (lower lows, lower highs for the current plus prior day’s price action trend). To exit, we scale out of half the trade if price action gets .35 cents under the cumulative 2-day low (current plus one prior day). For this CPN chart, that would be at (21.5 - .35) = 21.15 as the first scale-out exit. The secondary entry is to be set at a maximum of 1 full point under the cumulative 2-day low, in this case (21.5 – 1.0) = 20.5 for the second, final exit.

Figure1 CPN


Traders often needlessly wait for extremely large drops before scaling out of open winning swing trades, with exits far too low, to lock in significant potential profits. It’s a smart idea to test out various exit signals like those discussed, to start scaling out of open winning swing trades at the first sign of trouble, as illustrated in this chart, with a .35 below 2-day low exit to start exiting the position.

A good breakout trader always thinks to themselves “I can start closing out a winning trade here since it’s dropping, however I can always re-enter at new highs later, if it takes them out”. This thinking can help traders gain a more focused edge in their trading, without sacrificing open unrealized profits in their positions as the primary objective.

Swingtrading Exits: Head and Shoulders Breakdown Exits

It’s wise to become familiar with all bearish reversal patterns, such as head an shoulder patterns, and use these to help develop a 2-step scaling out of open winning swing trading plan as well. In Figure 2 Zale Corp. (ZLC) there’s an obvious head-and-shoulders pattern occurring on June 17th and 18th, 2013 on this 15-day candlestick chart. While not a sign to exit immediately, a protective stop can be placed at (9.2 - .35) = 8.85 on an open swing trade, in case it does attract sellers, and the price action drops.

Figure2 ZLC


Similarly, a 1 point trailing stop under the 2 day low yields a final exit signal at (9.2 – 1) = 8.2 for any remaining open long shares in a swing trade. This 2-step process (.35 under 2-day low for exiting half a swing trade, and 1.0 point under 2-day low for exiting the remaining half of a swing trade) is used whenever there’s a bearish signal, like a downtrend or head-and-shoulders pattern.

Similar exits can be used with candlestick chart patterns such as shooting stars and bearish engulfing patterns at the first sign of weakness in the underlying price action of what’s being traded. We’ll look at candlestick chart patterns with 2-exit trading strategies in a subsequent article.

Recognizing the Difference Between Trend Reversals vs Minor Pullbacks

A favorite saying of experienced professional traders is “when in doubt, get out”. When it comes to trying to decide about exits, and whether or not a trend has reversed or is simply chopping around in a minor pullback, it’s important to decide to exit sooner rather than later. Solid uptrends are generally strong from the start and continue for a healthy distance. Anything less than the best strong trending charts is likely to cause trouble and not be worth trading.

Using this 2-day “in vs out” process helps give traders a key decision-making process to use as part of their overall trade management plan. Buying new 2-day highs, and selling 2-day lows (meaning today plus one prior day, not two days prior to today), is a core professional trading strategy worth testing out.

Ken Calhoun is a trading professional who has traded millions of dollars of equities since the 1990s, and is the producer of multiple award-winning trading courses and video-based training systems for active traders. He is a UCLA alumnus and is the founder of TradeMastery.com and DaytradingUniversity.com, popular online educational sites that reach tens of thousands of active traders worldwide. ###

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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Results for CPN
Clark Joseph Kent
29 Jul 15 19:44:37
Notable earnings before Thursday’s open $BLL $BUD $BWA $BWEN $CAH $CBB $CBM $CBR $CCE $CCJ $CEVA $CI $CL $CME $COP $COT $CPN $CRL $CRR $CRS
Stock Market Picks
29 Jul 15 17:26:50
Earnings Releases for July 30th (before the open): $CL $CME $COP $COT $CPN $CRL $CROX $CRR $CRS $CSH $CVE $CVI $CVRR $DBD $DCIX $DFT
Capital Market Labs
29 Jul 15 14:40:44
$CPN High Fundamental Rating -> http://t.co/N8kDwzJPKq http://t.co/GDNukDkD7e
29 Jul 15 12:57:43
EPS 7/30 pre-market: $PG, $HST, $ACI, $COP, $AVP, $VLO, $ESV, $CPN, $MPC, $OXY, $CI, $EPD, $DLPH, $TMUS, $UPL, $IVZ http://t.co/AHh2gTLOgi
Greg David
29 Jul 15 11:50:39
Check out http://t.co/Y1RoKIXsmm. Top OTC trading group right now. Never paid promo. Related: $JBLU $HST $CIEN $MRVL $CPN $VIPS
29 Jul 15 11:29:35
$CPN is reporting tomorrow BMO, and is a potential signal for today @investiecomp. EPS est $0.01 Rev est $1.37B
29 Jul 15 10:05:58
$CPN Since last ER, stock dropped 23%. Will drop continue aftr ER on 7/30 Before Open? http://t.co/DYODRgrg2G
29 Jul 15 08:20:10
Pre-Market News Analysis on: http://t.co/1lesM3N7zw $CBS $WIN $CJES $CPN
29 Jul 15 08:04:02
$CPN: Calpine (CPN) to Release Earnings on Thursday: http://t.co/ix1SacB2ZF
Dakota Financial
29 Jul 15 07:45:08
Calpine $CPN Set to Announce Quarterly Earnings on Thursday http://t.co/qWdAE941l7
US Banking News
29 Jul 15 07:42:32
Calpine to release Q215 earnings on Thursday. Analysts expect 0.01 EPS. $CPN http://t.co/daCPtz0f1a
Ticker Report
29 Jul 15 07:41:48
Calpine $CPN Set to Announce Quarterly Earnings on Thursday http://t.co/v6SaW00GyY
Jon Vince
29 Jul 15 06:05:53
RT @OpenOutcrier: Earnings Thurs 7/30 Premkt: $ACI $ACOR $ADP $ALKS $ALXN $APD $AVP $AWI $AZN $BC $BCO $BG $BLL $BUD $CAH $CCE $CI $CL $CME…
Open Outcrier
29 Jul 15 06:02:29
Earnings Thurs 7/30 Premkt: $ACI $ACOR $ADP $ALKS $ALXN $APD $AVP $AWI $AZN $BC $BCO $BG $BLL $BUD $CAH $CCE $CI $CL $CME $COP $CPN (part1)
Capital Market Labs
28 Jul 15 12:14:09
Interactive Chart -> http://t.co/7Xola7dlNl $CPN Earnings are Rising. http://t.co/PVQkjLH5gu
Momentum PR
28 Jul 15 11:47:32
The #MostActive stocks on the #CSE this afternoon. #Investing #Momentum #Stocks $GHG $NHL $PUF $AFI $CPN
28 Jul 15 07:20:03
$OCLS cheap health care stock. Price target of $5. 200%+ upside $COO $CPN $JBHT $RPRX $EE $AHT investors read http://t.co/rWpJvFEbwZ
Shiraz Lakhi
28 Jul 15 06:43:42
Open Screener: Monday's Biggest Volume Backed %Decliners in UTILITY #Stocks $DYN $EXC $BIP $CPN ++ Full List: http://t.co/AbMrQKvoYZ
28 Jul 15 05:45:03
$CPN: Calpine Corporation (NYSE:CPN) Short Interest Update: http://t.co/XsWCsMjAvC
Breaking News Now
28 Jul 15 05:42:07
$CPN $TNDM: Calpine Corporation (NYSE:CPN) Short Interest Update: http://t.co/s1rxqnGr02
Penny Stock Secret
27 Jul 15 22:46:19
$71,000 in ONE TRADE!! By Follwing Their Signals More Info Here http://t.co/SVqoMkrw2z .. $CPK $CPL $CPN
27 Jul 15 22:00:59
Volume Alert - CPN 16.57 Calpine Corp $CPN Hit a high today of 16.91 Closing the day 07/27/15 at 16.57 -0.04 - http://t.co/Z5Y4fb82i2
27 Jul 15 15:55:24
$CPN Calpine Form 4 (Statement of Changes in Beneficial Ownership) SEC Filing From our Stock News Alerts App
27 Jul 15 15:55:02
$CPN: New Insider Transaction on CPN by Executive Chairman: http://t.co/xJKPpKrnrf
Insider Alerts
27 Jul 15 15:54:05
NEW insider transaction on $CPN reported a moment ago: http://t.co/gSyNTp3kDj
Capital Market Labs
27 Jul 15 15:32:59
Website -> http://t.co/J2FUNDrt2S $CPN Reports Thursday, Consensus Est. Rev: $1348.71M, EPS: $0.04 http://t.co/yIDONXPrW1
Momentum PR
27 Jul 15 12:15:07
The #MostActive stocks on the #CSE this afternoon. #Investing #Momentum #Stocks $UMB $ZRO $MMJ $BWN $CPN
Market Int Center
27 Jul 15 09:54:28
Potential Calpine $CPN Trade Has 9.33% Downside Protection ( http://t.co/24XvDYmj8x )
27 Jul 15 08:38:02
$CPN: Stock in Motion: Calpine Corporation (NYSE:CPN): http://t.co/FjLGHTv9nl
Capital Market Labs
27 Jul 15 08:05:51
Interactive Chart -> http://t.co/SltEesZNTO $CPN Return on Equity is Rising. http://t.co/OVmBKfAk5Y
27 Jul 15 07:19:41
Pre-Market News Analysis on: http://t.co/Qxsf8f7Hst $CPN $REXX $KEG $DYN
Breaking News
27 Jul 15 05:06:05
$LLTC $CPN: (NYSE:CPN), Rex Energy (NASDAQ:REXX), Key Energy Services: http://t.co/gAG6bwMDvQ
Greg David
26 Jul 15 22:56:05
Check out http://t.co/Y1RoKIXsmm. Top OTC trading group right now. Never paid promo. Related: $JBLU $HST $CIEN $MRVL $CPN $VIPS
Greg David
26 Jul 15 22:37:24
Check out http://t.co/Y1RoKIXsmm. Top OTC trading group right now. Never paid promo. Related: $JBLU $HST $CIEN $MRVL $CPN $VIPS
26 Jul 15 15:15:32
$CPN Since last ER, stock dropped 23%. Will drop continue aftr ER on 7/30 Before Open? http://t.co/QEgdoXQH97
Greg David
26 Jul 15 06:05:28
Check out http://t.co/Y1RoKIXsmm. Top OTC trading group right now. Never paid promo. Related: $JBLU $HST $CIEN $MRVL $CPN $VIPS
Stocks On High Alert
25 Jul 15 09:12:14
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25 Jul 15 01:05:19
Below Keltner http://t.co/p7uEtc7n5v $EEM $VALE $AMAT $RIG $RSX $BTU $VWO $NBR $AVP $OIH $RDS/A $CPN $CLR $CBS $SMH $GPS $TTM $HOV
The Legacy News
24 Jul 15 22:27:41
Calpine Sees Large Increase in Short Interest $CPN http://t.co/3ky6bSrNI2
24 Jul 15 22:23:04
$CPN: Calpine Sees Large Increase in Short Interest (CPN): http://t.co/nswh2rrJrk
Paul Hensen
24 Jul 15 00:19:31
RT @CryptocoinAPI: NEW Voting for #CompuCoin #CPN coin to add $CPN to GoUrl.io Payment Gateway. VOTE NOW - https://t.co/hSuG2PvSnW http://…
Paul Hensen
24 Jul 15 00:19:17
RT @CryptocoinAPI: Vote for #CompuCoin #CPN to get added at the GoUrl.io #Bitcoin Payment Gateway. $CPN - goto https://t.co/hSuG2PvSnW http…
Ticker Report
23 Jul 15 22:41:55
Short Interest in Calpine Increases By 20.1% $CPN http://t.co/QfvEmjrbBz
Dakota Financial
23 Jul 15 22:39:31
Short Interest in Calpine Increases By 20.1% $CPN http://t.co/IxtJjwsE88
23 Jul 15 14:32:36
Scan results - Hammer Candlestick today: $PLCM $APD $OI $CVE $PDCE $APA $CPN $KO $SO $VOD ... http://t.co/ePeNhKFVH2
23 Jul 15 08:48:02
$CPN is rated BUY, 44.0% upside by Wall Street analysts based on average ratings/targets http://t.co/prs2eHPqlP http://t.co/jseyEksuci
Today Penny Stock
23 Jul 15 03:56:50
Can Calpine Corporation $CPN Surprise Analysts
Stock Price
23 Jul 15 03:16:07
Ratings Watch: Calpine Corporation $CPN
Top Moving Stocks
23 Jul 15 02:52:58
Bargain Buy: Calpine Corporation $CPN
Top Moving Stocks
23 Jul 15 02:52:37
Calpine Corporation $CPN Analyst Rating Update
By  +Follow June 19, 2013 9:00AM



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