In Mahabharata, Abhimanyu didn't know the exit of the Chakravyuh and got trapped similarly in the stock market, exit in stocks is important.
In this learning threadπ§΅, sharing some Unique Exit Strategies of Profit Booking or Cutting Losses Early.
In this learning threadπ§΅, sharing some Unique Exit Strategies of Profit Booking or Cutting Losses Early.
First Question that would come to your mind is why exit is important?
There are cases in which stocks loses entire gains just because of some negative triggers about the company.
The famous case is of Yes Bank and chart is shared below.
There are cases in which stocks loses entire gains just because of some negative triggers about the company.
The famous case is of Yes Bank and chart is shared below.
In all these cases, stocks are held in the greed of getting more profits or in the hope of recovering the capital. In most of the cases it doesn't work in the favour.
Let's see some of the strategies which can be used to exit stocks and protect your profits and capital, both.
Let's see some of the strategies which can be used to exit stocks and protect your profits and capital, both.
1/ Using Moving Average:
There are multiple Moving Averages, but the common one that I use is the Exponential Moving Average.
Strategy:
π’ If you are an investor, then exit any stocks that go below 200 EMA
π’ If you are a trader, then exit any stocks that go below 21 EMA
There are multiple Moving Averages, but the common one that I use is the Exponential Moving Average.
Strategy:
π’ If you are an investor, then exit any stocks that go below 200 EMA
π’ If you are a trader, then exit any stocks that go below 21 EMA
Let's see some examples:
Yes Bank went below 200 EMA during April 2019. After that, stocks went down from 240 to 5.
If stock was held in the portfolio in the hope of recovery, then capital would have wiped off by 98%.
Yes Bank went below 200 EMA during April 2019. After that, stocks went down from 240 to 5.
If stock was held in the portfolio in the hope of recovery, then capital would have wiped off by 98%.
2/ Exit if Stocks break Swing Low:
This strategy is based on the Price Action where stocks need to be exited if it breaks previous swing low. Investors should check this on Weekly Time Frame and Traders should check this on Daily Time Frame.
This strategy is based on the Price Action where stocks need to be exited if it breaks previous swing low. Investors should check this on Weekly Time Frame and Traders should check this on Daily Time Frame.
Solara broke Swing Low on the weekly time frame and then stock crashed from 1630 to 320.
Investment capital down by 81% which could have been saved if stock was exited on time.
Investment capital down by 81% which could have been saved if stock was exited on time.
3/ Using ATR Trailing Stoploss Indicator:
There is an indicator on Tradingview with the name "ATR Trailing Stoploss" which is useful to exit stocks. It automatically gives sell signal at the time of exit. This indicator should be used only to exit and not to buy stocks.
There is an indicator on Tradingview with the name "ATR Trailing Stoploss" which is useful to exit stocks. It automatically gives sell signal at the time of exit. This indicator should be used only to exit and not to buy stocks.
In NURECA chart, sell signal based on ATR was triggered at 857 and after that stock crashed to 315.
Investors wealth got eroded by 64% in a matter of 3 months if stock was held in the portfolio with the expectation of the recovery.
Investors wealth got eroded by 64% in a matter of 3 months if stock was held in the portfolio with the expectation of the recovery.
These are very basic and common strategies that can be used by the Investors and Traders to exit stocks timely and protect the capital.
These strategies give hints, but sometimes stock might reverse and go up. As everyone says, protecting capital should be the priority here.
These strategies give hints, but sometimes stock might reverse and go up. As everyone says, protecting capital should be the priority here.
That's all about basic strategies to exit stocks and book profit or cut your losses early.
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Also, for live trading and stock market related updates, you can join our Telegram Channel ‡οΈ
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