Taking Profit - Malaysian Stocks

I wrote on June 14 2009 some suggestions on how to taking profit for Malaysian stocks.

My rules have not changed but I have to admit sometimes greed and fear did overtake my better judgement. It is good to remind myself what are the rules so I will not forget.

(1) Trade at least two units. 1 unit should be at least one lot minimum. The amount depends on what you can afford based on position sizing and the stock price. Let's say you can afford RM10,000 per counter, you see stock "A" is setting up for a potential swing trade and stock "A" is trading at RM1.00. As you can afford to buy RM10,000 per counter, you would buy 100 lots (10,000 shares). 1 unit in this example would be 50 lots.

(2) Monitor the stock price closely after it has increased 16% above its entry price. Watch the price action against the previous day low. This could go on for days if price continue to move higher. Exit half the shares once price close below the previous day low. Using the Stock "A" as example, you would have sold 50 lots. Why 16%? This is explained in my earlier posting.

(3) Adjust stop-loss to break-even for the remaining half. We now have a risk-free opportunity to find out how high the stock can go up.

(4) If price continue to move up raise the stop-loss to the latest swing low. Stock usually do not move straight up but in a zig zag manner. There is usually correction along the way, which create a new swing low. As an uptrend is defined a pattern of higher highs and higher lows, violation of the latest swing low suggest the market ability to sustain the uptrend is in question.

(5) Monitor the stock price closely after it has hit the projected price target. This could go on for days if price continue to move higher. Exit if price close below the previous day low.

How do I project the price target? You can use chart pattern projected target and Fibonacci ratio analysis but this is a separate topic all together.

(6) If you can afford a third unit then you could use either Chandelier Exit or monitor on the higher time frame chart (weekly or monthly) and look for bearish reversal sign there.

These are the rules, which I want to remind myself to follow all the time with no exception.

Disclaimer:Trading and investment involves risk, including possible loss of principal and other losses. I shall not be responsible for any losses or loss profit resulting from trading or investment decision based on my posting and information presented in this blog.