In my opinion, predetermining exit points is a critical skill to learn and needs to be known beforehand and entered shortly after you have received confirmation of your entry execution. By doing this immediately (and keeping that sell order active), you will create a disciplined approach to exiting at least a partial position and enhance your probability of a profitable trade. We have already discussed several methods used to determine where and when to consider exiting partial or full trading or longer core positions. They include the fifth-wave exits, as well as measured move exits, Fibonacci retracements, and Elliott Wave projections.
However, let’s start this chapter with a determination of what kind of trader you are before we can discuss exit methods, as they differ somewhat depending on time frame parameters. Deciding your time frame comfort level will help determine your exit points.
Day trading takes much more discipline than swing or longer-term trading because you do not have as much “wiggle room” or flexibility, since the goal is to be back “in cash” by the end of the trading session. You will need to be much more protective of your capital to avoid sharp intraday pullbacks or breaks of key intraday support so as to be able to trade another day! As a result, tighter, more defined rules of exit are needed.
Tighter protection may, and often does, result in day traders’ exiting positions when they least expect an execution to ...