Targets & Stop-losses: How to set the right levels for EXIT

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Well friends, a lot has been said about how to spot the right opportunities for entering a position but much less has been set about how and when to exit a position. Many a times, even good traders get over-zealous and set very high targets which can prove to be their nemesis. What you should keep in mind is that money is the fuel of stock markets. When that dries up, the upmove fails and nobody can predict when or why that happens. So its not wise to set very high targets. Secondly, some traders who are afraid of running into loss, set very tight stop-loss levels. That can prove counter productive because nobody has been able to predict the bottom of markets. Price can move sideways or can go down after you take a position and you cant help it. However, setting just the appropriate target and stoploss can improve your rate of success.

My experience has been that a target of 4-6% on a weekly basis is a healthy one, depending on which stock or index you are looking at. Some stocks like SBI, RELINFRA, & TATAMOTORS can give very good range while others like INFY, ICICI BANK, HINDALCO, etc give a lesser range.

Stoploss should be equal to the target that you have set.

Considering that most good traders will succeed in 7 out of 10 trades, you can expect a draw-down of max 18% and a gain of 42% in your portfolio (based on 6% stoploss & target). Nett profit therefore will be 24% maximum.

Try to use this method and I am sure that you will succeed

[A basic that is taken for granted here is that your direction sensing abilities are working well and whatever method you have adopted is dependable.]

I think a trailing stoploss which allows you to capitalize on the upmove while taking you out of the trade once the move is reversing is a good way to swing trade as well.


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Your question is
which MA s are right for me?
Any two moving averages can do based on timeframe.
If trading 5min or 1min chart, use smaller moving averages.

Donchian used 5 & 20 but always traded in the dominant direction.
Can you do that?
Some expert traders use 34EMA.OTHERS USE 56EMA.
You need to choose that which suits your trading style(daytrading-swing or position) and confirm by testing on past data and live data,fine tune-develop rules.
Moving averages are good for trend identification.But always get you in a trade late and get you exit late as well as LAGGING is moving average nature.

The point is moving averages are just not need couple of other things.

the proof and final acceptance of your method is in testing in future zone using carefully developed rules with a simulator.
If you say-"I cant do this-this looks too difficult",then forget about the question and follow some tips-remain at ease by avoiding hard work.
choice is yours.
please Dont get discouraged at what others say.start somewhere,choose right track,get help,keep moving.
Hope you fin this useful.

A trader needs to rise above common arrogance,comfort seeking & complacency.Otherwise market will punish him mercilessly.


Active Member
i am an investor not trader and i have invested 2,20,000/- in stocks and incurring a loss of 66,000/-. how can i exit by minimising the loss ? kindly reply with some useful advice ? :mad:

It is difficult to advice with out knowing your entry plan.When you bought the stocks what was your plan.It is very essential that you must have an exit plan ie that you will exit when the price falls below certain level that you will exit.Now it appears that you are already down by 25 %. Now either you take the losses and quit or keep the stocks and when market bounces back you can sell.Take advice from a professional who knows technical analysis.
But for heavens sake do not buy at this level and do averaging as many people will advice.Remember never catch a falling knife.

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