Now after you get into a winner and want to start to trail your winner, we at first move our stop up to break even, then we can trail by the weekly or daily low. Start to focus on the daily low and as you start to have real winners, the weekly lows will help drown out some of the noise.
In this trade through $29, we were aiming to make $5 risking $1, yet SQ didn't care and went much farther than any of us in the Alpha chat could have imagined. It ended up increasing by over $19 a share. Doing the math that’s a 65% gain on 3% risk.
For the members who trailed their winner by using the weekly low, were able to stay in through $48 and get stopped out down through $44 for around a 50% gain. When you trail your winner, you are not looking to catch the top, a trailing stop will keep you in through the top and eventually you will get stopped out lower. However if you trail properly you can catch the meat of the move while removing a lot of the emotional factors that tend to come with holding a big winner.
The main takeaways are:
- We have an idea of where a stock can go, but who says it can't go higher? By trailing we can have a game plan to stay in the position for greater profit while also managing our risk.
- Nothing is worse than having a profitable trade lose money due to the lack of proper stops.
- There can be times when a stock can shake you out, tick that prior low and then be
right back up. It sucks when this happens but no trade is perfect.