Is it a good policy to follow trends and if a stock is going up set an indicator so it sells and makes a small profit with a stop loss slightly below what you paid for it. Surely, stocks which are trending upwards will head that way. Is this a strategy some people use?
Yes indede. One of the simplist stratagies is the "free trade" method. For example, if you identify a long opportunity, and a stock crosses a breakout level at $10 take a quick profit and then let the remainder of the position ride out to its potential.
One way to impliment this would be to buy a stock at a key trigger, in this case $10, use a $9 stop loss on the whole postion, take a quick partial profit anywhere >$11 then let the remainder of the postion play out. Maybe the stock ultimately goes to $15. That would be a very nice winner.
The thing that the quick partial profit does at $11+ is that it will pay for a lot of stops in the trades that don't work. Many trades will go in your favor by a small amount but never run to your ultimate goal so by taking the quick partial profit it helps offset the trades that never work at all an stop out for the full loss that you were risking.
With a simple strategy like this, a trader who has only 60% winners will have a nice positive return over time.
Rich
Hi buzzing,
You might like to take a look at this thread - China's FTSE 100 swing trades:http://www.trade2win.com/boards/trading-journals/155976-chinas-ftse-100-swing-trades.html
It is a trend following approach, buying into the trend on a pullback. It works because prices don't tend to go up in straight lines. You buy at a price below a recent new high if the trend shows signs that it could be continuing.
You could even apply Tradesights free trade approach with this method by taking partial profits quickly, moving the stop to break-even and letting the remainder run.
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