Running head: TRADING STOCK EXITING STRATEGY

Trading stocks exiting strategy

Name

Institution
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The exit strategy for 900000 euros for three months will involve a well-predefined plan

for closing the open positions when they are still making a profit. The adopted exit strategy will

require a high degree of discipline to be undertaken. Before deciding on a particular exit strategy,

you will need to know your style of trading. The three types of exit strategy include the trailing

stop, fixed exit and dynamic or indicator based exit.

Using the trailing stop technique will work for me. The parabolic SAR will be used since

it provides an idea of where to place my trailing stop. The indicator value will change with a

change in each new price bar thus locking in some profits. Though in some cases Volatility stops

indicator can be used.

I will purchase a stock and place a £5.00 trailing stop. As the price of the stock increases,

the trailing stock increases with it and will always remain at £5.00 below the most recent high.

The trailing stop of the stock price will move higher and never down. You will only get out if the

stock moves £5.00 from the highest point against you. It only allows the market to run in your

favour indefinitely. The trailing stop will trail the lowest price of the stock. If the price makes a

reduced swing low, the investor should now exit the trade. If higher lows are consistently being

made, the trailing stop should be extended and used to lock in more and more profit (Nazário,

2015).

I will enter for a long position in the month of November 2018 when the stock price is

£5.00 per share (£900,000 in total value). Induce the trailing stop and wait for the price to

increase. In the month of December, I will move the trailing stop up below the previous level.

The stop up will continue moving to below the swing lows. Then in the last month, the trade will

be stopped out as the price will continue making a lower low. With a new market price of £7.36,

I will have made a profit of (7.63-5.00)180000 = £473,400. The above method works best here
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because of strong trends. A potential reversal will get me out. The trade will continue to profit

because the price is moving in the favourable direction and closes if the price changes its

direction by a certain percentage.

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Reference

da Costa, T. R. C. C., Nazário, R. T., Bergo, G. S. Z., Sobreiro, V. A., & Kimura, H. (2015).

Trading system based on the use of technical analysis: A computational

experiment. Journal of Behavioral and Experimental Finance, 6, 42-55.