How to scale out of winning stock using those five signals?

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It's a great feeling when a stock pick works out in your favor, but you don't want to fumbled the ball at the one yard line. You want to make sure you score the touchdown and collect all of the profits associated with that win. Today we're talking about how to scale out of a position that's worked in your favor so you can successfully capture the gains that you've made in that stock.
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There are at least five points where you should strongly consider selling a portion of your position when the stock goes on. A big run from your initial buy point.
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The first is the 20 to 25% profit zone. After a 20% run, you may be feeling really good and thinking, well, if this stock has gained 20%. How do I know that it won't gain 50 or 100%?
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and if it's not sending any sell signals like a break below the 50 day line, why wouldn't I hold it?
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It may seem a little counterintuitive at first,
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But experience will quickly teach us that the 20 to 25% level is often the perfect point to lock in some of your profits and eliminate the risk that a 20% gain could fade away to zero.
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It's a good rule to stick by to ensure you lock in at least some of your gains. You certainly don't have to sell the entire position.
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Perhaps consider selling 20% of the position. Now, let's say the stock continues to rally even further. Where is the next sell opportunity to lock in more gains?
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When a stock is really on a powerful run, we'll see it become extended above, not just the 50 day and 21 day lines, but also the ten day line as well. Once a stock becomes anywhere from 10 to 15% extended above the ten day line, that's often a good place to sell another 20% of your position.
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Now, usually after a stock is run up and become extended from the ten day line, it makes sense for a pullback to occur as nothing goes up forever.
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The third sell signal comes as the stock moves back below the ten day line and closes below it. Here, you might consider selling another 20% of the position. Then investors can use the 21 day moving average as a fourth line in the sand here.
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If the stock undercuts and closes below this exponential moving average, it may be a good time to sell yet again. Finally, the last sell signal comes as the stock closes decisively below the ten week line. This means that we want to see a close of at least 2% or more below the ten week line by the end of the trading week.
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Ideally, this close will occur in a stronger than average volume.
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Sometimes stocks can test this key level intra week, but find support here by the end of the week. This is important because big winners will test support at the ten week line along the way. So traders trying to hold for a massive gain don't want to get stopped out too early.
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So now that we've laid out all of these sell signals, let's take a look at an example.
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Here is a snapshot of chipmaker Nvidia during its big move in the second half of 2021. First, shares broke out from a two 3043 buy point from a consolidation which allowed the trader to initiate a position. Then the stock rallied 40%, passing through the first sell signal.
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The 20 to 25% profit zone. You could have taken profits there or held for a bigger run.
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the stock technically triggered to sell signals in one day on November 4th, when it also became more than 15% extended above the ten day line.
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The next sell signal for this position occurred on November 17th, when the stock closed below its ten day line. Then a few weeks later, the stock closed below the 21 day line, though it closed well off its lows. So maybe some traders sold more of their position here, while others may have waited just because of how much it rallied back by the close.
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If you didn't sell there a few sessions later, it closed below the 21 day line, again, presenting another chance to lighten up. Now we can switch over to a weekly chart to see how a few weeks later, in early January 2022, the stock closed sharply below the ten week line as volume picked up from the prior two weeks.
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This clearly marked the end of Nvidia's run,
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but savvy traders were able to lock in some of their gains at much higher prices before this final sell signal occurred. So to summarize, we don't want to leave our profits up to chance. How you exit your trades is just as important as how we enter them. We must have definite sell signals that we can use even when things are going great and a stock moves perfectly in our favor.
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Again, the five strategic places at which you may want to lock in profits are the 20 to 25% profits zone. 10 to 15% extended above the ten day line at a break of the ten day line. A break of the 21 day line. And finally, a decisive break of the ten week moving average.
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You can make this your own if you want to use just three of these five sell signals, you can.
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In that case, you'd be selling in thirds. Just do it fits your trading personality and risk tolerance. What's important here is to have a plan. Each of these lines in the sand help you preserve your gains while trying to ride a stock's move higher for bigger profits.