Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?



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

Signup for our daily newsletter and get our best articles emailed right to you!

Results for CPN
Rosner Stocks
27 Nov 15 19:57:09
$CPN Recent News Updated Friday, November 27, 2015 9:59:22 PM $NATI $TQQQ $UUP $BLTA https://t.co/H2iR7UVw0l
27 Nov 15 15:51:05
WMT Wal-Mart Stores, Inc. Volume https://t.co/j3dNqrOrTZ $WMT $IWM $CVX $CPN #WMT #share #finance
27 Nov 15 15:42:06
IDA Idacorp, Inc. Market Cap https://t.co/8AiCidrUoA $IDA $XLI $CPN $SWKS #IDA #pennystocks #stock
Investors Hangout
27 Nov 15 15:37:34
EPP iShares MSCI Pacific Ex-Japan Financials https://t.co/zZzXtsove7 $EPP $CYBR $CPN $NFLX #EPP #investing #invest
27 Nov 15 15:34:33
CPN Calpine Corp. Last Trade https://t.co/WkTTpnTIuL $CPN $GPRO $JPNL $SLV #CPN #pennystocks #tradeideas
27 Nov 15 15:26:02
$CPN is rated BUY, 51.3% upside by Wall Street analysts based on average ratings/targets https://t.co/prs2eHPqlP https://t.co/IkIabhNoAo
Market Int Center
27 Nov 15 07:34:36
Potential Calpine $CPN Trade Has 13.81% Downside Protection ( https://t.co/BE9NldgW49 )
Breaking News Now
27 Nov 15 07:02:23
$AMBA $CPN $TUMI: Stocks With Impressive Top Line Growth And Liquidity: Ambarella …: https://t.co/oUpSlWjHFY
27 Nov 15 06:29:37
Zacks Investment Research Lowers Calpine to Hold $CPN https://t.co/nLtCEMDO7D
The Legacy News
26 Nov 15 21:29:26
Calpine Shares Down 1.1% $CPN https://t.co/MDYzWURlUg
Breaking News Now
26 Nov 15 21:29:05
$CPN: Calpine Shares Down 1.1% (CPN): https://t.co/WvCipP0wTp
Ticker Report
26 Nov 15 21:24:26
Calpine Shares Down 1.1% $CPN https://t.co/3F45zHVj9g
US Banking News
26 Nov 15 21:22:26
Calpine Shares Down 1.1% $CPN https://t.co/ttt2vYa84H
26 Nov 15 16:42:15
GDSI Global Digital Solutions, Inc Tick https://t.co/bBoDsgEnAE $GDSI $CPN $XLF $CMI #GDSI #invest #share
26 Nov 15 16:38:05
CVX Chevron Corp. Prev Close https://t.co/K5s1N3jRq5 $CVX $CMG $CPN $DGAZ #CVX #nasdaq #stocks
Stock Forums
26 Nov 15 16:37:33
CPN Calpine Corp. Yield https://t.co/OZkKBoP2J6 $CPN $BAC $AVO.TO $HPQ #CPN #investing #stockmarket
26 Nov 15 16:33:34
AMZN https://t.co/wC3ffZqETZ, Inc. Current Price https://t.co/fvT0Qu4fML $AMZN $GERN $CPN $GERN #AMZN #tradeideas #stocks
Momentum PR
26 Nov 15 13:23:51
End of the day #MostActive on the #CSE #MomentumPR #Stock #Market $KWG $IMH $GLH $EAT * $ACB * * $IWS * $WAW $GCI $CPN $MMJ
Momentum PR
26 Nov 15 07:13:18
#Thursday morning #MostActive on the #CSE #MomentumPR #Marijuana #WasteWater $MMJ $KWG $GLH $CPN * $ACB * $GCI * $IWS * $AVV
25 Nov 15 22:52:45
Black Friday $SALE on #stockmarket. Cash-rich, 5.7 EV/EBITDA, $60M stock buyback plan in Q4. Read: https://t.co/qM8kTQH7RQ $COO $CPN $JBHT
25 Nov 15 22:01:15
$CPN: Calpine Stock Price Down 1.1% (CPN): https://t.co/94cQzQEYV0
The Legacy News
25 Nov 15 21:52:26
Calpine Stock Price Down 1.1% $CPN https://t.co/KNrDRUliAW
Ticker Report
25 Nov 15 21:47:44
Calpine Stock Price Down 1.1% $CPN https://t.co/urIdVUf69e
US Banking News
25 Nov 15 21:46:14
Calpine Stock Price Down 1.1% $CPN https://t.co/pGJUpAu2Qc
25 Nov 15 12:32:05
$SALE Undervalued cash-rich retailer due for gains on Black Friday; $60M stock buyback plan in Q4 https://t.co/qM8kTQpx0i $COO $CPN $JBHT
Tsachy Mishal
25 Nov 15 12:31:29
@kc_analyst @JeffCNYC @MicroFundy What do you view as the risk in $CPN?
an analyst in kc
25 Nov 15 12:28:37
@CapitalObserver @JeffCNYC @MicroFundy gas <$2 $CPN utilization goes way up & power prices stay higher as coal becomes marginal price setter
Tsachy Mishal
25 Nov 15 11:40:26
@MicroFundy @JeffCNYC $CPN a similar situation. Leveraged & tied to natgas but a homerun if natgas ever goes up
Momentum PR
25 Nov 15 07:16:55
@Mobi724 #Wednesday morning #MostActive on the #CSE #MomentumPR #MicroCap #Couponing #SimplePayment * $MOS * $EAT $KWG $ADX $CPN
Sleek Money
25 Nov 15 06:48:33
Calpine Lowered to Hold at Zacks Investment Research $CPN https://t.co/eQAkgZBZBf
25 Nov 15 06:47:20
Calpine Lowered to Hold at Zacks Investment Research $CPN https://t.co/sGgfG4RG3h
Media Sentiment
25 Nov 15 06:14:10
$CPN received a new alert. Find out why at https://t.co/nZwqReM0tj #stocks #daytrading #trading #mkt #NYSE #NASDAQ #markets 158
Market Int Center
25 Nov 15 06:12:13
Calpine $CPN Showing Bearish Technicals With Support At $14.35 ( https://t.co/7ygs9s4upN )
Breaking News
25 Nov 15 02:02:07
$LBRDK $CPN $RELX: Here Is How Hedge Funds Are Trading Liberty Broadband Corp …: https://t.co/TkHqLQZ2F8
Consumer News
24 Nov 15 16:04:24
Calpine Lowered to “Hold” at Zacks Investment Research $CPN https://t.co/onlKoNmSAx #acn
DE Asset Management
24 Nov 15 15:30:46
RT @RatingsNetwork: Calpine downgraded by Zacks Investment Research to hold. https://t.co/wDntypzlEk $CPN #CPN
24 Nov 15 15:25:31
Calpine downgraded by Zacks Investment Research to hold. https://t.co/wDntypzlEk $CPN #CPN
Dakota Financial
24 Nov 15 15:15:46
Calpine Cut to Hold at Zacks Investment Research $CPN https://t.co/U2dsik4ZOf
US Consumer News
24 Nov 15 15:02:18
Calpine downgraded by Zacks Investment Research to hold. https://t.co/8lm70TVuLL $CPN #CPN
24 Nov 15 14:41:03
$CPN is rated BUY, 45.6% upside by Wall Street analysts based on average ratings/targets https://t.co/prs2eHPqlP https://t.co/XvMpFVLQiN
Mother of Sin
24 Nov 15 12:55:28
$CPN Up its something.
Ariel Silahian
24 Nov 15 12:39:40
Algo trading CLOSING signals: Nov/24 $EL(2.8 %) $ARR(-0.8 %) $AMH(0.4 %) $CPN(-1.6 %) $PM(-2.1 %) $MRK(-0.3 %) $GOOG(5.2 %) $CYS(-3.6 %)
24 Nov 15 07:04:19
New trend detected on $CPN when price was 14,73 https://t.co/0DtyxQCkXj #TradingSystem #Randomwalk
24 Nov 15 05:44:03
$CPN: Shares of Calpine Corporation (NYSE:CPN) Sees Large Inflow of …: https://t.co/6cjd3jL5CG
Breaking News Now
24 Nov 15 04:40:01
$PCG $SO $CPN: Utilities Stocks News Review: PG&E Corporation (PCG), Southern …: https://t.co/K6XmHJhpx6
24 Nov 15 01:53:15
$CPN: Market Mover: Calpine Corporation(NYSE:CPN)?: https://t.co/f03nMtGYLm
Mother of Sin
23 Nov 15 17:21:29
$CPN chart https://t.co/GQLqIWBMK4 Still kinda watching this MAR 15 Calls @ 1.65 x 6K on 11-2
Momentum PR
23 Nov 15 13:00:45
#EndOfTheDay #MostActive on the #CSE #MomentumPr #MicroCap $CPN $GHG $MQ $AFI $VGM
23 Nov 15 12:21:00
$71,000 in ONE TRADE!! By Follwing Their Signals More Info Here https://t.co/n4FmW1UTLN .. $CPK $CPL $CPN
Momentum PR
23 Nov 15 07:17:12
#MondayMorning #MostActive on the #CSE #MomentumPR #SmallCap $GHG $CPN $MQ $AFI $LDS
By  +Follow June 19, 2013 9:00AM



blog comments powered by Disqus

 Today's Must Reads

What Crowdfunding Leaders Are Saying About the SEC’s Approval of Title III

How the Drug Price Scrutiny is Affecting Pharma Stocks

8 More Tips for Choosing the Right Crowdfunding Platform

Will the Post-Smartphone Era Bring Wearable Drones?

3 Cloud Stocks That Pay Dividends


Small-cap stocks offer investors many benefits, ranging from higher growth potential to overlooked value opportuni... in Equities.com's Hangs on LockerDome

About us

Equities.com is an advanced financial data portal and social network designed to connect self-directed investors with the world’s most innovative startup and small cap companies. Through our in-depth coverage of small cap markets, comprehensive research and stock valuation reports, state of the art issuer products, and world class events, Equities.com provides the social tools and insight that drive tomorrow’s investment relationships and opportunities.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.

Login or Register