Exit Strategy help us Protect Our Captial

There is a common saying “let your profit run and cut your loss short”. Any successful trader should consider using Stop Loss on his trades. This is leads us to a large concept of Exit Strategy.

Your exit not your entry is what determines whether your trades are successful or not. If you enter a position correctly and your exit is bad, your deal will look bad. Conversely, Good exits can make bad entry look good. This demands to know some about technical analysis.

Let’s take an example to demonstrate this:

Click here to view the chart

This is a chart of HT/USD (Huobi token), and it formed a well-known Head and Shoulders Reversal Pattern. Let’s see how we could Exit with the least damage once we recognize this Pattern.

Anyone who has some knowledge of technical analysis knows that when price drop below neckline in this pattern (as shown on the chart) it means that to get out immediately even if you are in red. So we can place our exit point just below the neckline. The big question now Why to exit quickly when it drop below neckline?

Because this pattern has a price objective, in other words, we can determine how much the token will go down once it breaks down the neckline. In our example above, the price of HT was around $4 when it broke down the neckline, to predict how much HT will go down we can do this ( Take the vertical distance from the head (point A) to the neckline, then calculate the difference) in our example the difference would be $2 because the point A was around $6 and neckline was $4. Now, to know the price objective you just need to minus $2 from the price of the neckine ( $4 - $2 = $2), so the first support is around $2. Supersingly,  the price of HT now is $1.65 but remember we exited when the price was $4. Our exit was super excellent. 

If you just kept your tokens without exit till now, it would end you up with huge loss.

As a trader you should accept a loss as a part of the game, even the best traders lose but most importantly how large your loss is.You must avoid such catastrophic losses by all means and you can achieve this by applying Exit Strategy.

Stop loss save your capital and gives you an opportunity to jump in a new trade. Markets are always full of opportunities but you need to protect your money from disappearing to take advantage of them.