Lets say youre day trading and employed the 10 a.m. rule to buy 1,000 shares of XYZ at 15 in the morning. Happily, by 3:30 p.m. the stock has zoomed to 20. As the closing bell approaches you face a decision. You can sell all 1,000 shares of XYZ for a five dollar (33%) profit, which is a very good days work. Or you can stick with your position in anticipation of follow-through gains the next day and additional profits on your 1,000 shares. Often a stock that has a big day will gap up at the open the following morning and add several more points in the first half hour or so.

In most cases, however, the wise course is to sell half the position (500 shares) heading into the close and put half of those profits into your account. Then you can hold the remaining 500 shares and look for an opening gap the next morning. If that occurs, great! Your trade is even more profitable. However, if XYZ does not move higher the next morning or even declines, you can sell the remainder of your position. Your trade will still end nicely in the black because you pocketed profits the previous day. Note: We never let a stock fall far so much that it wipes out all our profit on the shares remaining in play.

The same goes for trades lasting several days, weeks or months. If your position has gained, say, 10-25% or more in a relatively short period, you can sell half, pocket those profits and let the remainder run to hopefully greater gains. Many traders keep whittling down their position a little at a time and finally close it when they figure that they have maximized their profits.

This approach offers tremendous flexibility. For example, many high-flying stocks are prone to wide price swings. The savvy investor will hop aboard a stock in the early stages of an upswing and sell half positions as it advances until finally selling out completely. Then the stock swings in the other direction, taking the price below his original buying price. When the stock bottoms out and begins another upswing, he can go for another profitable ride.

In our opinion, the winning investor plays defensively. He protects his capital by using a stop loss; he takes half profits when they are available; he tries to keep some shares in play to take advantage of the wiggles in the market.

Our goal is to consistently take money home-, i.e., put profits into our account. For our money, thats the best way to win in this challenging game of investing.

Breakouts through resistance are the most desirable of all trade opportunities. (This discussion will be the buy opportunity discussion of breakouts. (An equal sell opportunity exists on breakdowns through support). A breakout is a penetration of resistance based on a pricing established over time with price reversals taken place at approximately the same price point in previous time periods.

Sounds easy. Well it sure sounded easy when that guy in the $1000 seminar told me about it. I also read how easy it was in the $90 book on trading that said would make me a wealthy independent trader.

Breakouts are wonderful if they continue. If they fail you can expect the pricing not to trend but to return to a range bound probably touching the lower pricing before it rises again. That price movement is probably beyond your stop loss and you will not be pleased.

This occurs more often than you want to believe. Since so many other people see the breakout they are as nervous about it as you are and you have a larger number of quick exits with the slightest wiggle. This is referred to as buyers remorse or a bull trap. What this really represents is a serious hit against your P&L.

Remember, breakouts are a product of an established range bound market. The continuation of the sideways market is the rule with a move away from support or resistance back into the trading range. That means a failed breakout is the rule. The breakout is the exception. Some traders believe the reverse is true. That can cost you a bundle of cash in trading losses.