The 10% rule helps to secure my desired risk-multiple of the given setup. Most setups are between 2.5 and 3R. Independent of the 10% rule I always exit the trade when it drops below a specific risk-multiple threshold after hitting the goal risk-multiple before. This rule is portfolio and not chart driven! A quick sell signal is also triggered once a stock retraces a big initial move on the very next day.

Moreover I trim winners on my various sell signals. These can be divided into proactive and reactive signals. To the former belong climax moves, clothesline and century mark hits. Climax moves are typically measured as a extension above the 10d or 50d moving average and they tend to peak via violent daily reversals. The clothesline is more relevant than the century mark in almost all cases as a price target tool.

On the reactive side I trim when a stock violates a moving average that it has respected for a given time period (months and not weeks!). Stocks dropping through major support levels such as base breakout pivots and/or major PLLs will also make me sell as some sort of last chance exit, but I rarely let it get that far.

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Disclaimer: This article is my opinion which stems from my own experience gathered trading real money in the stock market. It represents my style and it fits my personality and risk allowance. More power to you if you are a net profitable trader despite violating everything that’s written above!

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