One of my favorite things to do is take a free position and/or lock in gains when I can. Since I had pretty nice gains on most of the positions I initiated yesterday I was very focused on rolling up my stops this morning. I’ve now guaranteed myself (assuming that they don’t gap against me) to at least cover my commissions on all but two of my positions. Rolling up stops is definitely an art, as opposed to a science. You’ve got to try to leave them loose enough to not get taken out by normal fluctuations, yet make them tight enough to not give up too much of your gains.

My commissions & fees average about $22 per round trip trade. ($9.99 commission + any SEC fees on the sale + any ECN fees for certain types of orders) As an example, let’s say I’m trading with $7,500 positions. What I’d do is wait until I’ve made at least $100 on a position to start rolling my stop up. Around the $100 mark I’d either raise the stop to break-even (before commissions) or up to when my P&L is $20 to $30. Then I just keep pushing them higher as the position moves in my favor. At $200 profit I might move my stop to $50. $300 profit might go to a $150 stop. Once I’m in those level of profit I like to just keep the stop at 50% of my gains.

At some point I’ll just start looking to sell outright. That may be when one of my targets gets hit or approached, that stock gets sluggish, the general market looks like it’s reversing, when I get sick of looking at it, etc. Like I said, this is an art and it’s easy to shoot yourself in the foot like I did the other day on that NVEC trade. But the whole point of this post is that once I can take a free position mind is more at ease. There’s nothing like being in a “can’t lose” position. Taking free positions is a great way to help preserve capital. Trading really is all about money management.