• How do I take safe profits? Check out this chart and example…
• What you need to know about the right way to take profits…
• Plus, don’t miss my BIG announcement — you can only see it here…

Day trading is all about maximizing profits. But too many newbies don’t know how to take profits the right way.

It’s partly why you always trade with a plan. You should have an idea of when to get in — but that’s not the end of it. Once you have a position you’re only halfway there. It’s essential to know when to get out.

Lots of newbies gamble their positions. Maybe they got in at a lucky time, and they’re in the green. But now they’ve got to get out safely with profits. The question is when.

If you ask a new trader when they’re going to sell you’ll probably hear something like, “when I land on the moon!” I probably don’t need to tell you how unrealistic that is.

If you don’t know when to sell, you’ll never become a self-sufficient trader. Sorry, that’s the truth.

My approach to systematic profit-taking has allowed me to safely support my family with day trading.* Here’s what you need to know.

Why Profit-Taking Works

The stocks I trade — penny stocks — are highly volatile. It’s a double-edged sword.

Volatility means two things …

• Big potential profits
• Big potential losses

You never really know which you’re going to get. So you have to focus on the best setups. And when you win, get out before it turns bad.

This is an emotional game. It makes sense — there’s money involved. Sometimes a lot of money.

When traders see their positions start to return profits, they have to fight the urge to hold. Remember the volatility. These stocks can turn from a winner to a loser in a matter of minutes.

My best advice: don’t stick around to figure out which it will be.

Sure, maybe it’ll go higher. Use that as a learning experience and revise your strategy.

But maybe it’ll tank. If you took my advice and locked in profits, you can pat yourself on the back for a quality trade.

Notice how I didn’t say ‘profitable’ trade. I try not to focus on the profits when I’m trading. If I think about the money, I risk making a mistake and holding too long.

I’m focused on making smart trades, whether they’re profitable or not.

How to Trade Smarter

First of all, remember what I said earlier: Focus on the best setups.

Profits start with the most promising plays. So study up to recognize which stocks could be spikers and which are useless crappers.

Then you need to recognize key levels. Resistance lines that offer upward pressure should support your entry.

Then it’s all about taking profits or cutting losses.

Cut Losses

I don’t know how many times I need to say it … Trade with a plan.

If your position falls below your planned support level, cut it. No exceptions.

Once that happens, you’re no longer trading in your comfort zone. The plan didn’t work so it’s time to get out ASASP. No, that’s not a typo. I added another S — as soon as safely possible.

Don’t submit a market order for whatever price they’ll give you. That’s not smart either. You should be able to get out with a limit order at your planned level.

Take Profits

This is a little more complicated. You’ll never see me buy the exact bottom and sell the exact top. That’s not my plan of action.

Instead, when my trades start going well, I’ll take profits at key levels along the way.

Always remember to sell into strength. Penny stocks are notoriously illiquid. If you wait to sell until you start seeing red candles you might not be able to get out right away. There will be other sellers in front of you.

I’ll usually lock in some profits on the breakout, just in case the stock is a fakeout breakout. Then I’ll continue to sell bits here and there as it climbs. Check out this chart of Health Revenue Assurance Holdings Inc. (OTCPK: HRAA).

Here’s how you could hypothetically play this stock. Your entry would be where I drew the circle. There’s a pretty good amount of resistance at 27 cents.

All of the squares I drew could be potential profit-taking, first at the 30-cent breakout. Then more after it survived the dip and continued higher.

Usually, I’m all out by the time the price starts breaking down through previously set levels. Look at the last square I drew in as it broke below 35 cents. That’s a key sign of weakness to watch out for. Dips are OK but if the stock really starts falling, don’t stick around.

Final Thoughts

Too many newbies forget about taking profits. They might spend hours looking at different stocks to play. But even if they choose the right one, without profit-taking knowledge they risk screwing it up.

Don’t focus on catching the top … You’ll only get frustrated. As Tim Sykes says, this isn’t an exact science. So don’t treat it like one.

You’ll never know how high the stock goes. Focus instead on staying safe.

I’ve been where you are. The only way to become a self-sufficient trader is to play strategies with the potential for safer returns. Systematic profit-taking is a great strategy to keep you in the game.

Focus on the process,

Roland Wolf

Editor, The Wolf’s Den

P.S.

*All content in this newsletter is intended for educational and informational purposes only.

The material in this newsletter is not to be construed as (i) a recommendation to buy or sell stocks, (ii) investment advice, or (iii) a representation that the investments being discussed are suitable or appropriate for any person.  No representation is being made that following The Wolf’s Den’s strategies will guarantee a particular outcome or result in profits.  The price and value of stocks may fluctuate depending upon various market factors, and, as such, the strategies used by The Wolf’s Den to adjust for those fluctuations may change without notice. 

There are significant risks associated with trading stocks and you must be aware of those risks, and willing to accept them, in order to invest in these markets.  Past performance of any trading system or methodology is not indicative of future results.  You should always conduct your own analysis before making investments. 

You should not trade with money you cannot afford to lose and there is a risk that trading stocks will result in a complete loss of your investment.  Trading stocks, particularly penny stocks, is not suitable for everyone and requires hard work, due diligence, capital, and substantial time to monitor the market and timely execute trades.