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    Running Head: Trading Stock Exiting Strategy

    Uploaded by

    Carlos Alphonce
    The document discusses an exit strategy for trading stocks over a three month period with 900,000 euros. It will use a trailing stop technique, placing a trailing stop below the highest price to lock in profits as the stock price increases. Specifically, it will purchase a stock at £5 per share and place a £5 trailing stop. As the price increases, the stop will rise but never lower. In November 2018 it will enter a long position of £900,000 worth of stock. It will move the trailing stop up each month as the price rises. By the end of the period in early 2019, the trade will be exited as the price makes a lower low, realizing a profit of £473,400.

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    Running Head: Trading Stock Exiting Strategy

    Uploaded by

    Carlos Alphonce
    52 views4 pages
    The document discusses an exit strategy for trading stocks over a three month period with 900,000 euros. It will use a trailing stop technique, placing a trailing stop below the highest price to lock in profits as the stock price increases. Specifically, it will purchase a stock at £5 per share and place a £5 trailing stop. As the price increases, the stop will rise but never lower. In November 2018 it will enter a long position of £900,000 worth of stock. It will move the trailing stop up each month as the price rises. By the end of the period in early 2019, the trade will be exited as the price makes a lower low, realizing a profit of £473,400.

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    The document discusses an exit strategy for trading stocks over a three month period with 900,000 euros. It will use a trailing stop technique, placing a trailing stop below the highest price to lock in profits as the stock price increases. Specifically, it will purchase a stock at £5 per share and place a £5 trailing stop. As the price increases, the stop will rise but never lower. In November 2018 it will enter a long position of £900,000 worth of stock. It will move the trailing stop up each month as the price rises. By the end of the period in early 2019, the trade will be exited as the price makes a lower low, realizing a profit of £473,400.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    52 views4 pages

    Running Head: Trading Stock Exiting Strategy

    Uploaded by

    Carlos Alphonce
    The document discusses an exit strategy for trading stocks over a three month period with 900,000 euros. It will use a trailing stop technique, placing a trailing stop below the highest price to lock in profits as the stock price increases. Specifically, it will purchase a stock at £5 per share and place a £5 trailing stop. As the price increases, the stop will rise but never lower. In November 2018 it will enter a long position of £900,000 worth of stock. It will move the trailing stop up each month as the price rises. By the end of the period in early 2019, the trade will be exited as the price makes a lower low, realizing a profit of £473,400.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    Running head: TRADING STOCK EXITING STRATEGY

    Trading stocks exiting strategy

    Name

    Institution
    TRADING STOCK EXITING STRATEGY
    2

    The exit strategy for 900000 euros for three months will involve a well-predefined plan

    for closing the open positions when they are still making a profit. The adopted exit strategy will

    require a high degree of discipline to be undertaken. Before deciding on a particular exit strategy,

    you will need to know your style of trading. The three types of exit strategy include the trailing

    stop, fixed exit and dynamic or indicator based exit.

    Using the trailing stop technique will work for me. The parabolic SAR will be used since

    it provides an idea of where to place my trailing stop. The indicator value will change with a

    change in each new price bar thus locking in some profits. Though in some cases Volatility stops

    indicator can be used.

    I will purchase a stock and place a £5.00 trailing stop. As the price of the stock increases,

    the trailing stock increases with it and will always remain at £5.00 below the most recent high.

    The trailing stop of the stock price will move higher and never down. You will only get out if the

    stock moves £5.00 from the highest point against you. It only allows the market to run in your

    favour indefinitely. The trailing stop will trail the lowest price of the stock. If the price makes a

    reduced swing low, the investor should now exit the trade. If higher lows are consistently being

    made, the trailing stop should be extended and used to lock in more and more profit (Nazário,

    2015).

    I will enter for a long position in the month of November 2018 when the stock price is

    £5.00 per share (£900,000 in total value). Induce the trailing stop and wait for the price to

    increase. In the month of December, I will move the trailing stop up below the previous level.

    The stop up will continue moving to below the swing lows. Then in the last month, the trade will

    be stopped out as the price will continue making a lower low. With a new market price of £7.36,

    I will have made a profit of (7.63-5.00)180000 = £473,400. The above method works best here
    TRADING STOCK EXITING STRATEGY
    3

    because of strong trends. A potential reversal will get me out. The trade will continue to profit

    because the price is moving in the favourable direction and closes if the price changes its

    direction by a certain percentage.


    TRADING STOCK EXITING STRATEGY
    4

    Reference

    da Costa, T. R. C. C., Nazário, R. T., Bergo, G. S. Z., Sobreiro, V. A., & Kimura, H. (2015).

    Trading system based on the use of technical analysis: A computational

    experiment. Journal of Behavioral and Experimental Finance, 6, 42-55.

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