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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
Greg David
7 Jul 15 00:32:00
Check out http://t.co/Y1RoKIXsmm. Top OTC trading group right now. Never paid promo. Related: $JBLU $HST $CIEN $MRVL $CPN $VIPS
6 Jul 15 22:30:26
Elder Blue http://t.co/heoUr44eW4 $AMD $HUM $FOXA $LUV $BBRY $AAL $GLW $ABEV $GRPN $FEYE $NRG $CPN $TGT $CELG $IAG $ZTS $HZNP $HRB
6 Jul 15 21:00:02
$CPN is rated BUY, 42.5% upside by Wall Street analysts based on average ratings/targets http://t.co/prs2eHPqlP http://t.co/EWHjOEcysb
King of investments
6 Jul 15 13:28:01
Calpine Corporation's Price Decline Is Unwarranted http://t.co/Cjv5hbiLbK $CPN
Market Int Center
6 Jul 15 12:26:30
Calpine $CPN Showing Support Near $17.17 ( http://t.co/E2aVWo1EKF )
Long & Short Ideas
6 Jul 15 12:16:21
Calpine Corporation's Price Decline Is Unwarranted http://t.co/pe4SD6RRmb $CPN
Energy Stocks SA
6 Jul 15 12:16:21
Calpine Corporation's Price Decline Is Unwarranted http://t.co/1TukGjLST3 $CPN
Seeking Alpha
6 Jul 15 12:16:20
Calpine Corporation's Price Decline Is Unwarranted http://t.co/1gAZj8S7k8 $CPN
Ticker Report
6 Jul 15 07:56:45
Calpine Receives Average Rating of “Buy” from Analysts $CPN http://t.co/QpKtbgqOLO
Dakota Financial
6 Jul 15 07:54:17
Calpine Receives Average Rating of “Buy” from Analysts $CPN http://t.co/B5pURJC6UO
6 Jul 15 07:50:01
$CPN: Calpine Receives Average Rating of “Buy” from Analysts (NYSE:CPN): http://t.co/VuKb7ElHPR
Greg David
6 Jul 15 07:09:31
Check out http://t.co/Y1RoKIXsmm. Top OTC trading group right now. Never paid promo. Related: $JBLU $HST $CIEN $MRVL $CPN $VIPS
Penny Stock Secret
5 Jul 15 22:09:20
$71,000 in ONE TRADE!! By Follwing Their Signals More Info Here http://t.co/SVqoMkrw2z .. $CPK $CPL $CPN
Capital Market Labs
5 Jul 15 02:24:24
$CPN Trade Card -> http://t.co/J2FUND9REi http://t.co/unEOe5kRZk
Capital Market Labs
3 Jul 15 04:04:29
$CPN Trade Card -> http://t.co/J2FUND9REi http://t.co/T86l0kr3Tq
Kevin B. Bantz
2 Jul 15 15:38:23
$TSLA Target $370 -- Make it fast, my A/C 'ONLY' shuts off for eight minutes at a time here in Lake 86403 Havasu $CPN http://t.co/996y1Hl2Fb
Daily Contracts
2 Jul 15 09:22:05
Real-Time feed of company contracts, original agreements and executive updates from $CPN http://t.co/TVCLepWAOm
2 Jul 15 09:02:58
$NVDA acquiring TransGaming Assets, values $TNSGF $TNG.V at 300%+ upside, 25 cents $COO $CPN $JBHT investors read http://t.co/M6ATjY2Anp
Reggie Noble
2 Jul 15 08:14:53
Other potential longs. $CSTM $FCAU $FLO $DFRG $DAR $CY $HCP $HRB $KING $SWFT Still waiting for bounces in $OI $TEX $CNP $CPN $GPK $HLT $TYC
2 Jul 15 07:45:02
$CPN is rated BUY, 40.9% upside by Wall Street analysts based on average ratings/targets http://t.co/prs2eHPqlP http://t.co/rcGyvT9fdc
Insider Alerts
1 Jul 15 15:59:06
NEW insider transaction on $CPN reported a moment ago: http://t.co/aKCODNkCKt
1 Jul 15 15:57:11
$CPN Calpine Form 4 (Statement of Changes in Beneficial Ownership) SEC Filing From our Stock News Alerts App
Dan Rosenblum
1 Jul 15 12:22:12
I've been building a position in $CPN this week, its trading at 7X FCF . Company at these prices can buy back entire float in under a decade
1 Jul 15 09:24:21
$CPN: Calpine to Announce Second Quarter 2015 Results on July 30, 2015: http://t.co/bRgfGRUfgt
1 Jul 15 09:21:34
$CPN New Calpine Corp. Event From our Stock News Alerts App
1 Jul 15 09:18:33
$CPN Calpine to Announce Second Quarter 2015 Results on July 30, 2015 From our Stock News Alerts App
Shiraz Lakhi
1 Jul 15 09:04:39
Screen Ideas: Top 10 Utilities #Stocks Ranked By HIGHEST %ROE $CPN $AES $ITC $STR $SGU +++ Full Screener Here (Free) http://t.co/KXSN7nBdN5
investor wired
1 Jul 15 04:51:47
Institutional ownership of 4 stocks is at high levels: $CPN $DHT $ITC $PWR http://t.co/fkHRiANOEM
investor wired
1 Jul 15 04:48:04
Institutional ownership of 4 stocks is at high levels: $CPN $DHT $ITC $PWR http://t.co/fkHRiB5pwk
30 Jun 15 16:12:40
Get the latest news and updates for $GXP $PGN $CPN $ISLE $ICE automatically with MarketBeat Daily http://t.co/nSJuDsYidj
30 Jun 15 14:52:31
Stochastic Buy http://t.co/wzRBfQ16nV $ASHR $KORS $AMH $CPN $UTX $LVS $SLV $IAU $GLD $ADXS $ONVO $VSH $EGO $IRWD $XLE $ETN $XPO $APC
Kristine Esperacion
30 Jun 15 14:30:05
Reaching new 52-week lows: Calpine $CPN in the power sector and Arch Coal $ACI | CONSOL $CNX in coal sector.
Terri Marsh
30 Jun 15 12:06:27
High Court's EPA Ruling Cheered, But Hurdles Remain http://t.co/Odk2YtI0aE #IBDNews via @IBDinvestors $CPN $EXC $BTU $CLD $ACI $ANR
Ophir Gottlieb
30 Jun 15 10:44:09
Technical Collapse -> http://t.co/qN33mkFpWw $CPN Down -1.72% to New Low http://t.co/NVtpeFBfFM
30 Jun 15 09:15:53
52-Week Low Alert: Trading today’s movement in CALPINE $CPN http://t.co/eVNawxsq8Q
30 Jun 15 04:31:02
$CPN: Stocks Roundup - Calpine (CPN), Seadrill (SDRL), Southwest (LUV ...: http://t.co/RMTRzLcAiL
Capital Market Labs
30 Jun 15 02:15:57
$CPN Trade Card -> http://t.co/RBqAQhCG6N
Ophir Gottlieb
29 Jun 15 18:28:00
Technical Collapse -> http://t.co/qN33mkFpWw $CPN Down -3.33% to New Low http://t.co/7rPQDrQcMm
29 Jun 15 15:18:03
$CPN: High Court's EPA Ruling Cheered, But Hurdles Remain: http://t.co/ic9mA8P9Wk
Breaking News
29 Jun 15 13:11:02
$HERO $CPN: Mid-Day Movers – Hercules Offshore, (HERO), Calpine (CPN ...: http://t.co/jYE6Fljg9S
29 Jun 15 07:49:03
$CPN: Analysts Take on Calpine Corporation (NYSE:CPN): http://t.co/VnawvbF9OS
Penny Stock Secret
29 Jun 15 00:05:13
The Most Accurate Stock Alert Service Made $240,000 Yesterday http://t.co/SVqoMkrw2z .. $CPK $CPL $CPN
Breaking News Now
28 Jun 15 23:09:03
$CPN: Shares of Calpine Corporation (NYSE:CPN) Sees Large Inflow of ...: http://t.co/vNjGwYLyq3
Breaking News
28 Jun 15 21:49:01
$CPN: Company Shares of Calpine Corporation Drops by -2.1%: http://t.co/1YMa3xvNqW
By  +Follow June 19, 2013 9:00AM



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