A trader scales out of breakout trades when profit hits twice the average daily range, selling a third of the position. The rest stays until price closes below the 10 or 20-day moving average, locking in gains while letting winners run.
With regards to trade management, how I would approach it. So in a trending market environment, so say I've bought through that breakout level and say the average daily range for this stock over the last 20 days is say 5%. And so the moment my unrealized profit is at 10%, so double the ADR, I'll take a third of the trade off. So then I'm left with two-thirds of the trade. Going back to this example, we imagine that the MAs start to trend higher, taking a third off here. I'm left with two-thirds of my position. When price begins to pull back now, say it breaks the 10-day, if this stock has historically historically to respect the 10-day, the moment it closes below it, I'll take the position off. Or if it has shown tendency to respect the 20-day and it breaks below the 20-day, I'll take position off.
