HTO stock (OTE) of Athens Stock Exchange gained 6% in 3 days while the Greek stock market broke below the lowest low since 1997! HTO was a [intlink id=”1197″ type=”post”]stock pick on Monday [/intlink] when I explained the reasons why I expected an uptrend resume. If you happen to have followed the stock pick, you might now wonder what the best trading system to exit the trade would be. Since I myself have bought 3,000 HTO shares, I am going to describe how I plan to scale out my trading position. Although scaling out has the disadvantage of missing profits in case the stock outperforms, it prevents us from giving back profits and removes the psychological stress of holding shares.
Buying HTO stock on Monday was easy for everyone since the stock’s volatility on that day was minimal. If you had trusted the stock pick, you could have entered long anywhere between €6.09 and €6.15. I ended up buying 3,000 HTO shares at €6.12, setting a stop loss at €5.92 due to ATR and the Fibonacci retracement level I discussed in that post. So, my total risk was €0.20 per share or €600.
The last two days the stock picked up and has climbed up to €6.50 where I exited 50% of my trading position. According to my trading system, I usually trade out 50-80% of my shares close to important resistance levels and at least more than my initial stop loss’ spread. In this instance, I had to trade out above €6.32 to fulfill the last condition and I finally went on to sell 1,500 shares at €6.50 due to being a round number and stock prices usually lose momentum at those figures. Another good exit point to begin scaling out is €6.60, which has been a support level during November when HTO stock was trending upwards. So I have secured almost €500 from this trade alone and I am moving my stop loss up to breakeven point for the rest of my position, making it a risk-free trade.
Now I am left with 1,500 HTO shares. My next step of my trading system in regards to scaling out is to trade out half of the remaining position. The exit point should return double the profits of the first exit in terms of price difference, therefore in this case I need to trade out 25% of the shares above €6.90. A reasonable exit should be at €7.50, a major resistance level of the last 3 months’ uptrend. If you are not that patient, you can trade out at €7.00 although there are no signs that the stock’s price could reverse there. Trading out 750 HTO shares at €7.50 will bank me €1,000 more for a total profit of €1,500.
The remaining 750 shares will be traded out much higher in order to complete scaling out of the position. If HTO stock has indeed reversed its long term decline and has entered an uptrend that is going to last for months, I could have picked up a great entry point. Let’s say the stock climbs up to €12 the next year or two, the profit for those last 750 shares will sum up to €4,500 winning about 100%! Not bad for a risk free trade, I think. Should that happen, the risk/reward ratio of the overall HTO stock trade will return a 10:1 figure.
