There are several methods using which one can trade financial markets. No method is perfect and there is no holy grail. One has to find a method which suits his working style and brings mental peace.
Here I discuss one such method which I have been using for positional cash stocks long only type. I have been using it for some time now and I have happy with the results. With markets obliging and with proper position sizing, one can double account within an year using this method.
Disc: I am just mentioning what is working for me and in no way an advise to start using this method for yourself.
Chart Example: VINDHYATEL
The above is VindhyaTele stock chart, weekly scale. In this post I am explaining what I do after I spot a breakout and once in a stock how to ride it.
The stock gave a breakout on a close above Rs. 723. Now there are two ways to enter, if the breakout is a runaway breakout, its prudent to wait out for a retracement or search for another stock. Or one can enter if the breakout is not runaway like this one.
I usually buy quantity worth Rs.75000 per stock.
After entry my Stop loss is 8-10% or the nearest swing low, which ever is closer. In this case 650 which also coincides with the up sloping red trend line.
I have found that in momentum stocks, 8-10% SL seldom gets hit and one can get good value for money.
Next, is the hot question: Target kya hai??
I am not a big fan of targets. So I do not believe in Multibaggers.
After entry and having a SL with which I am comfortable with, I tend to book out half tranche at 10-11% profits. So my R:R for the first tranche is a tad above 1:1 and it works. Nothing like making the cash register ring.
Once out of half position I raise my SL to dynamic 21ema levels. Till it does not close below it at 3.25 PM on any day, I am riding half of the position.
So in the above case, first booking target for me would be Rs.800. And then the trailing is on. Now the stock is above Rs.1000. I may have lost Rs. 200 on the first tranche, but as I said ,I believe in taking money off the table at regular intervals.
So this is how I approach any cash long position. The above can be used on daily charts also.
Hope you found value in the post. Discussions are welcome.