There are a number of things that can interfere with a stock`s movement and force you to close your position sooner than you`d anticipated. Your stock market lesson plans should cover all of these possibilities, but here are some reasons that should always prompt you to close a position: 1. The end of a trend. All trends end some time, and you should be prepared for this. 2. The stock`s upward movement has slowed or been abruptly broken, ending its momentum. 3. The stock is approaching a major psychological barrier, perhaps reaching 100 dollars or 200 dollars a share, which should have been anticipated in your plan 4. The stock is about to reach a resistance level it has been unable to break through before. This technical barrier should also have been anticipated in your plan. 5. A sudden market wide decline, or the threat of one, or some other serious uncertainty, which leads to unsafe market conditions. Exiting a losing trade is not a big deal. Ending a position whether or not the stock reaches its target price, in accordance with your stock market lesson plans, is good trading. The best traders would rather lose a small profit than take an unnecessary risk. You don`t have to win on every trade; no one does, and it`s dangerous to try. In fact, by limiting losses, a good trader can be profitable overall, and make money on only 40 percent of his trades. |
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