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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.

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Results for CPN
MB Network
28 Feb 15 08:42:45
RT @ProVesting: $HLSS $CPN: Stocks Ticking Down - Home Loan Servicing (HLSS),Calpine (CPN ...: http://t.co/JZ3KQXfBfQ
Energy Shots
28 Feb 15 08:38:51
RT @StockSignaling: Upgraded Stocks Trading in a New Range: $JCP $SRPT $WWW $TNK $CCG $NE $WWE $DHT $CPLP $TSL $JASO $CPN $TAP $BUD $SPN ht…
28 Feb 15 08:24:43
RT @ProVesting: $HLSS $CPN: Stocks Ticking Down - Home Loan Servicing (HLSS),Calpine (CPN ...: http://t.co/JZ3KQXfBfQ
28 Feb 15 08:21:03
$HLSS $CPN: Stocks Ticking Down - Home Loan Servicing (HLSS),Calpine (CPN ...: http://t.co/JZ3KQXfBfQ
Beverage Consulting
28 Feb 15 05:43:14
RT @StockSignaling: Upgraded Stocks Trading in a New Range: $JCP $SRPT $WWW $TNK $CCG $NE $WWE $DHT $CPLP $TSL $JASO $CPN $TAP $BUD $SPN ht…
27 Feb 15 03:46:06
$CPN: Utilities Stocks News Recap-Calpine (CPN), Xcel (XEL), Edison (EIX ...: http://t.co/dwFlmvrhxq
26 Feb 15 11:16:03
$EXXI $CPN: Morning Buzz - Energy XXI (EXXI), Calpine (CPN), Fifth Third (FITB ...: http://t.co/DmaZ4H4jwr
26 Feb 15 07:56:59
Robert A. Mosbacher, Jr. Sells 7,500 Shares of Calpine Stock $CPN http://t.co/p58wokpy65
26 Feb 15 07:01:23
$CPN - Amended Statement of Changes in Beneficial Ownership (4/a) http://t.co/qwuQYcKoea
26 Feb 15 06:59:02
$CPN: New Insider Transaction on CPN by Director: http://t.co/jb2XaYvJvn
Insider Alerts
26 Feb 15 06:58:07
NEW insider transaction on $CPN reported a moment ago: http://t.co/ceykBiqpZf
Insider Filings
26 Feb 15 06:58:04
$CPN: MOSBACHER ROBERT A JR sold a net $165,154 in CALPINE CORP. http://t.co/8B4OrxkeC2
26 Feb 15 06:58:02
$CPN Calpine Form 4/A (Amended Statement of Changes in Beneficial Ownership) SEC Filing From our Stock News Alerts App
US Banking News
25 Feb 15 17:07:12
Calpine Director Sells $150,150.00 in Stock $CPN http://t.co/bDFEL1VaeS
25 Feb 15 17:03:03
$CPN: Calpine Director Sells $150150.00 in Stock (CPN): http://t.co/D42V8eTNDH
Breaking News Now
25 Feb 15 17:01:02
$CPN: Calpine Director Sells $150150.00 in Stock (CPN): http://t.co/YM5yjCtx1i
Sleek Money
25 Feb 15 16:57:28
Calpine Director Sells $150,150.00 in Stock $CPN http://t.co/tEiKMSkxUC
SaaS Security
25 Feb 15 15:30:12
RT @HotKeyTrading: Insiders Selling: $SAAS $CPN $ATHN $TIVO $JACK $CYH $NFLX $MMC $AWI $MPC $RJET $DE $IBM $STT $RLYP http://t.co/Vv2VEn80m…
25 Feb 15 15:30:08
Insiders Selling: $SAAS $CPN $ATHN $TIVO $JACK $CYH $NFLX $MMC $AWI $MPC $RJET $DE $IBM $STT $RLYP http://t.co/Vv2VEn80mr #nasdaq #trader
Insider Filings
25 Feb 15 14:05:14
$CPN: MOSBACHER ROBERT A JR sold a net $150,154 in CALPINE CORP. http://t.co/8B4OrxkeC2
Breaking News
25 Feb 15 12:01:02
$CPN $MRVL: Stocks in the Spotlight-Calpine (CPN), Marvell (MRVL), Talisman ...: http://t.co/4ji64lsc75
Ryan Mallory
25 Feb 15 05:26:27
$CPN Long Setup http://t.co/F2xCO6VkxI
Beverage Consulting
25 Feb 15 03:02:16
RT @StockSignaling: Upgraded Stocks Trading in a New Range: $JCP $SRPT $WWW $TNK $CCG $NE $WWE $DHT $CPLP $TSL $JASO $CPN $TAP $BUD $SPN ht…
Ryan Mallory
24 Feb 15 19:15:27
Swing Trading Watch-List: $TGT $LVLT $APA $CPN $DOW http://t.co/nIdphdEtVD
Market Int Center
24 Feb 15 12:33:13
Calpine $CPN Trading Near $22.24 Resistance Level ( http://t.co/iSonR2iMU5 )
24 Feb 15 09:03:01
$EYES is up 20% today after successfully restoring vision to blind patients. $25+ tgt $COO $CPN $JBHT investors read http://t.co/OSr6rq0DgY
Ben Obadia
24 Feb 15 07:53:32
$CPN $SO perking up into FED, utility players
Daily Contracts
24 Feb 15 06:34:15
Real-Time feed of company contracts, original agreements and executive updates from $CPN http://t.co/TVCLeqeccW
Wholesale MBA
24 Feb 15 01:19:29
RT @StockSignaling: Upgraded Stocks Trading in a New Range: $JCP $SRPT $WWW $TNK $CCG $NE $WWE $DHT $CPLP $TSL $JASO $CPN $TAP $BUD $SPN ht…
Penny Stock Secret
23 Feb 15 22:56:42
This Guy Turned $100 Into Over $10,000 In Just 30 Days!!! http://t.co/NovWYe2RAx .. $CPK $CPL $CPN
23 Feb 15 18:57:49
CPN -0.32% Stock Charts $CPN Calpine Corp. (NYSE) Last Updated: 02/23/2015 20:57:52 CPN Stock Chart - 1 Month http://t.co/gUkewdmGXs
Market Int Center
23 Feb 15 09:20:01
Calpine $CPN Showing Support Near $21.46 ( http://t.co/suWDvig1H7 )
23 Feb 15 09:04:52
RT @OptionRunners: $CPN buyer of a September/June 24x call calendar spread. 3,000 contracts for a net debit of .53.
23 Feb 15 08:56:03
$CPN: Zacks Rating Update on Calpine Corporation: http://t.co/FIRietQDSj
Option Runners
23 Feb 15 08:23:12
$CPN buyer of a September/June 24x call calendar spread. 3,000 contracts for a net debit of .53.
Beverage Consulting
23 Feb 15 02:55:16
RT @StockSignaling: Upgraded Stocks Trading in a New Range: $JCP $SRPT $WWW $TNK $CCG $NE $WWE $DHT $CPLP $TSL $JASO $CPN $TAP $BUD $SPN ht…
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23 Feb 15 01:36:13
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22 Feb 15 20:26:07
$CPN: Company Shares of Calpine Corporation Rally 2.65%: http://t.co/MEVKFZKrX3
Beverage Consulting
21 Feb 15 06:26:03
RT @StockSignaling: Upgraded Stocks Trading in a New Range: $JCP $SRPT $WWW $TNK $CCG $NE $WWE $DHT $CPLP $TSL $JASO $CPN $TAP $BUD $SPN ht…
21 Feb 15 04:49:05
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By  +Follow June 19, 2013 9:00AM



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