Do you know how to maximize your profits in any stock market trade? That is just what I hope to teach you today in this post.
No one has a clear cut winning formula nor crystal ball when it comes to stock market trading. Stocks can move in any direction. It can move move up and it can move down in price. What you need is an exit strategy that will allow you to survive the poor stocks while profiting handsomely from the excellent ones.

A trailing stop loss is have been shown to be the most dependable and effective. What is a stop loss? The explanation of a stop loss is vital for anyone who is involved in trading. A stop loss order instructs your stock broker to sell your shares if the price falls below a certain level.
There are two approaches to this. The simplest technique is to determine how much of your investment you are willing to lose as a percentage. A reasonable rule of thumb is to avoid going below 10%. Calculate the price of the stock at this point and use that as your stop loss. Continue to raise the stop level as the stock price rises to maintain the same percentage gap. Some brokers are very good as they provide a trailing stop loss service in which the trader instructs them what percentage he/she want the stop loss to be set at and the broker takes care of that for you.

The second strategy, which comes from Nicolas Darvas' book How I Made $2,000,000 in the Stock Market, is a little more involved. The markets usually move in stages. Before reversing direction, a rising stock will reach a peak. It may repeat this process several times at each stage. The main aim is to take a close look at the stock's chart and note where the lowest drops are. This will enable the trader to set the stop loss below that value. The second step, according to Nicolas, is to purchase more shares when the stock breaks out of the sideways trend, and then adjust the stop loss up to just below the lowest part of the drop when the stock starts moving sideways again.

Exiting with a stop loss only works if you stick to it and don't reduce it because you think the price will climb in a few days. In a few situations, you will be correct, but more often than not, the price will continue to move against you, and you will lose even more money. In addition, the money that is still invested in the initial stock that is declining cannot be used on another investment.

Finally, a word of caution about using the stop loss approach to protect your assets. There are times when the markets witness a sharp decline in price; nevertheless, the amount a price can drop in a single day is limited. If it falls this far, your stop loss may be violated, and you may be unable to sell. Even if these scenarios are rare, it is better to be prepared for them. So they don't catch you off guard when they do.

In conclusion, do you now know how to maximize your profits in any stock market trade? Use the knowledge and make more profits.
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