One of the most difficult things to plan for is when to take profits off a winning position. Many people focus on creating a strategy that defines the stocks they will trade, identifies the appropriate risk to place on those trades, and then some kind of trigger that will cause them to enter the trade. All of that is fine, but the real magic sauce (in my opinion) comes from what you do after you have a winner. That exit strategy is more important in my book so today lets chat about a way to use what is known as the daily/weekly trail method.

The first thing we will assume is that you have a winning, long position and as the days go on you see it continues its uptrend. This strategy assumes you will take your profit in two parts. First you will use a moving average on the daily chart to exit the first half of your position. Most traders use the 20 simple moving average for this. The idea is that when you have a pullback that closes below the 20 period moving average you will exit half of your position.

From there you will be left with half of your position and will then turn to the weekly chart. Using the same moving average on the weekly chart (which is very close to the 50 day moving average at this point) you will then trail the rest of the position until there is a close below that moving average.

Why do it like this? Well this is a mix of both worlds here and usually satisfies the human personality. On one hand you will likely want to take your profits quickly for fear you will give them all back. Using the daily trail will allow you to do this. On the other hand we are all greedy and will like to hold for as long as possible, generating the greatest possible profit. Using the weekly trail will allow you to do this on the remainder of your position. Now you are happy you locked in some profit quickly, but are also happy to let some of the position shoot for more.