When day trading, swing trading, or options trading, it is very important to place stops. Stops are mechanisms used to automatically exit a position in the event it reaches a certain price. The most efficient manner of placing stops is to place them based on technical parameters.  That is at major support/resistance, a break of a trendline, or a stop based on price action that makes a potential technical formation obsolete.

It is extremely important to hold strong on these stops. You typically want to place your stop in a position that gives you a little breathing room. For instance, if a stock has major support at 70, you may want to place the stop at 69.73 just to make sure you don't get stopped out on an insignificant quick intraday move through 70 support.

That said, always keep a close eye on price action that causes any reason for entry into the given trade to no longer be valid. If you entered the trade based on up trendline support and the stock is clearly breaking the up trendline, why continue to hold the trade? There are some cases in which you enter a trade based on a few factors, such as up trendline support as well as solid support just under the up trendline in the event the trendline breaks. In this case, you would want to exit just after all reasons for entering the trade are thwarted.

Bottom line: Don't continue to hold a position if the technical parameters behind the entry are broken. Take the emotion out of stock trading by placing intelligent stops and sticking to your guns.

Andy Swan is co-founder and head trader for DaytradeTeam.com.  To get all of Andy's day trading, swing trading, and options trading alerts in real time, subscribe to a one-week, all-inclusive trial membership to DaytradeTeam by clicking here.