Always have a reason to get into a trade, and then a reason to get out of one. Having a trading plan gives you an edge over the traders that use emotions, predictions, and opinions to make trading decisions.
- Your original stop loss is hit at a price level that shows your original entry was wrong.
- Your trailing stop is hit in your time frame.
- The position closes below the previous day’s low for shorter term traders.
- A key price support level is lost.
- A key moving average is lost.
- Your profit target is achieved.
- The chart enters a historical overbought level for your trading vehicle.
- Volatility expands and the risk is now too much for your position size. Or you exit due to a volatility stop.
- Your time stop is hit because the trade failed to move in the time you allotted.
- You are traveling or going on vacation and you can’t give the trade the attention it requires.