The difference between successful traders and the wannabees is clear.
Traders who are struggling to make money in the market — focus on their time on stuff they can’t control.
On the other hand, seasoned vets KNOW:
There are three things entirely within our control: trade size, entries, and exits.
Yet, I watch so many traders struggle to manage these effectively. That’s why I want to share the best exit strategies I learned over the years.
Now, if you’re not thinking about your outs then you are at a major disadvantage.
Some trades hit their targets, but fail to turn a profit reliably. Even experienced traders regularly calibrate their entries to squeeze the last juice out of each trade.
Selecting and managing your targets is an active skill, not something you learn once and never think about again. I continuously review my trade journal to find tweaks that make me more profitable.
Here is a list of common problems I hear about or I personally faced over the years with solutions adapted to your level of trading.
Problem – No defined target
Before you ever click the mouse, three things should be as clear as day: trade size, entry, and exit. If you can’t write down those three things, you have no business getting into a trade.
Newer traders love to focus on their entries, getting the perfect ‘buy’ that’s near their stop. A few ticks go by and their suddenly in the green.
But then they freeze…questions forming in their head. Where do you take your profit? Is it too early here? Should I let it run?
It quickly spirals into analysis paralysis. The next thing you know, the profits are gone, and you’re staring at a loss.
Solution – Pick out your target using one of the following methods
I’m going to give you a few options to pick out your profit target.
- The same distance as between your stop loss and entry – If you struggle to turn a profit, start by making your risk to reward 1 to 1. That means your target should be equidistant from the entry and the stop loss.
- Support and resistance levels – Stocks love to oscillate in a range before making their move. This creates areas known as chart consolidation. They make excellent places to take your profit.
- Percentage – Some trades work best based on percentage gains. I know of a scalper that aims for roughly 0.5% on his stock trades, and his exits are independent from his entries.
Whatever method you ultimately choose, make sure it fits your strategy. Then, focus on increasing your win rate before you start tweaking your risk to reward ratio.
The breakeven trader
Problem – You hit your target, but still aren’t consistently making money
Everyone hits a plateau in their trading…it’s part of the process like a right of passage. The hardest point comes when you struggle to turn a consistent profit, or at least a sizable one.
This problem took me the longest time to get past. You know you need to alter your strategy, yet you’re afraid it will suddenly start losing. It’s a really tough balance.
Don’t try to overhaul your entire strategy at once. Instead, break it down into smaller pieces, optimizing each one individually. Start with the foundational items and work to the more nuanced areas.
Solution – Work to scale out of your trades
Two measures ultimately determine your profits: win-rate and risk to reward ratio. Calibrating your win-rate often involves changes to your strategy. I wouldn’t start there.
Instead, I would focus on your risk to reward ratio. You won’t need an overhaul of your trading. Just focus on scaling out of your trades.
Since everyone has their own style, you should run several tests over a series of weeks. Start by figuring out how many targets you want to work with. Then look at how much you want to release at each level.
One critical concept with scaling out of trades – once you hit your first target, always move your stop loss to breakeven at a minimum. You never want to let a winning trade turn into a losing trade.
The profitable trader
Problem – Not getting the most out of your winners
The longer I traded, the more I realized that a strategy needs to be a living, breathing thing. Some traders use entirely different approaches based on whether they’re in a bull or bear market.
It’s hard to know when you should let your winners run, or shoot for smaller profits.
Solution – Adjust to market conditions
There are some easy adjustments you can make based on some commonly known factors.
- Seasonality – Look at which months tend to be bullish for stocks vs bearish.
- Holidays – Volume lightens up near holidays. That drives more volatility in the market.
- Day of week – A lot of traders look for volume to lighten up on Fridays. That leaves the market floating in whatever trend it’s in.
- ETFs and similar stocks – I love to look at ETFs that hold the stock I’m trading to get a sense of how that sector is doing. Related stocks also provide excellent gauges on the broader trend.
My favorite part of the day is reading notes from traders that find success in the markets. It’s great to hear them smash through barriers and take their trading up a notch.
Mentors provide invaluable insights into your trading. They create a sounding board that helps you identify opportunities.
That’s why I became the head of Weekly Money Multiplier. I want to help retail traders just like you become successful. No matter your level of experience, you’ll find insights that will take you to the next level.
Click here to learn more about Weekly Money Multiplier.