Understanding Entry and Exit strategies
Think of stock trading like a surfer searching for a wave on the beach. You have to find the right moment to jump on the wave. Entry and exit strategies are important in stock trading. You have to know when to enter and when to exit. Generally, finding the right entry point is not as hard as finding an exit point.
Unfortunately, there is no set rule to determine when to make an entrance and when to exit. Most traders opt to follow market research and given strategies and get out with decent profits before the markets come crashing down on them.
Never go in blind in a trade. Always have a plan in place and strive to stick to it as much as possible. You may use your judgment to make adjustments to the plan as and when you see fit while trading. Take a look at your plan and determine the different scenarios you may encounter. Put in place strategies you may follow if the different scenarios occur.
Guidelines for successful entry and exit strategies
To have a chance at succeeding, you have to find and use the right strategy. No matter the strategy you choose, you have to follow the given principles to stand a chance at succeeding.
Let’s have a look at some of the guidelines:
- Pay close attention to the direction of the trend. The market doesn’t move in a straight line. It moves in waves. Paying attention to the direction of the trend will help you determine the entry point. As you watch the trend, strive to make an entry when there is a slight pullback. If the trends go up then it is best to focus on long positions and if the trends go down then it is advisable to trade in shorts. The trend line should help you determine your next move, watch them closely.
- Utilize good instruments. When trading, good instruments can help you make the most of your trade. After zeroing in on your stock, make use of instruments to determine when to trade. If there is an uptrend then you should trade strong stocks and if there is a downtrend then you should go for weak stocks. Pay close attention to the indices, if you notice them going up then you should consider trading in aggressively growing stocks and if the indices are falling then you should consider shorting stocks to stand a chance at getting profit.
- Patience is important. When trading, patience is vital. Pay close attention to the price waves as these will help you determine when to enter and when to exit. In case you wish to short your stocks then you should wait until there is a rise in prices on the trend line, complete with a downward slope. In case you notice the stock starting to fall again then you should jump right in with your shorted deal.
Ultimately, having a good trading strategy and following the guidelines given above will help you determine when to enter and when to exit the market.