How Do You Maximize Your Profits In Any Trade On The Stock Market

In commercial exchange, nobody has a crystal ball. The share price can go up or down. What you need is an exit strategy that allows you to survive the bad actions and make a good profit from the good actions.

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The method that I have found that works best is a trailing stop loss. For those who do not know what a stop loss is, I will explain it briefly. A stop loss is an order for your broker to sell your shares if the price falls to the level that you specify.

There are two ways to do this. The simplest method is to decide how much you are willing to lose as a percentage of your investment. A good rule of thumb is not to fall below 10%. Calculate the stock price at this level and set it as a stop loss. As the stock price rises, keep raising the stop level to maintain the same percentage gap. Some brokers offer a trailing stop loss service, where you tell them what percentage to set the loss and they do it for you.

The second method is a bit more complicated and comes from “Nicolas Darvas” in his book “How I Made $ 2,000,000 on the Stock Market”. Markets tend to flow in stages. a rising stock will peak and then fall again. You can do this multiple times at each stage. The idea is to follow the stock chart and see where the lowest dips are and set the stop loss just below them. A second part proposed by Nicolas is that when the stock breaks out of the sideways trend, he buys more stocks and when the stock starts to go sideways again to move the stop loss up just below the bottom of the dip.

Using the stop loss as an exit strategy only works if you hold it and do not lower it, thinking that the price will rise again in a few days. In some cases you will be right, but what usually happens is that the price keeps moving against you and you lose even more money. Second, the money still tied to the first share that falls cannot be used for another exchange.

Finally, a word of caution about using the stop loss system to protect your capital. There are times when markets experience a rapid price drop, there are regulations on how much a price can drop in a day. If you fall this maximum distance, you can avoid the stop loss and you may not be able to sell. Although these situations are rare, you better know about them. So you won’t be surprised when they happen to you.

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