At some point in time, you will need to learn how to take profits. This is a serious thing as many traders do not know how to take profits.
Let's not talk about if the trade is on the losing side. Occasionally you will have a winning trade. Maybe even a very very profitable trade. So how do you know how to take profits?
In today's article I will teach you how to use the 50 MA to take profits.
The chart above shows the setup for a 60 min triangle bottoming play. The trader can buy the triangle pattern in AAPL when the stock breaks out of the triangle.
Notice how before the breakout, the stock was trading below its 60 min 50 MA.
After the breakout, the stock went back above the 50 MA.
AAPL just keeps moving higher and higher after that and how does the trader take profit?
Decide to sell 1/2 of the position when the stock trades below the 50 MA
Or you can sell the entire position when it trades below the 50 MA
Why does using the 50 MA work so well?
The reason is that an explosive stock will usually move up a lot without dropping below the 50 MA. It is a moving average that is not too long or too short.
If you use a 20 MA as a guide, you may be stopped out too early. If on the other hand you use the 200 MA, you may exit the stock too late. So using the 50 MA is the sweet spot.
Moving averages is a powerful tool and many traders use it to ride the trend.
While this may not be the best way to take profits off the table, it does give you a solid and realistic way to book your profits.
Hope this article helps you in your journey. Like and follow me for more articles like this.