Covering a Short with Buy Stop

[amc6987]

Hey guys, I am new to the market and am messing around with a mock portfolio. I'm trying different techniques and have become confused with covering a short.

My main question is this: is there a way to protect my gains by placing a buy stop order to cover a short at a certain price?

For example I shorted a stock at a price of $20 a share. It has since decreased in value to $15 a share, so if I cover my position now I will have made a gain of $5 per share. However, I want to keep my position, as I believe the price may go down further. On the other hand, I wish to protect my gain of $5 per share.

Thanks.

[Airelon]

Some people use the tool "Parabolic SAR" as a stop/loss tool, together with the ATR volatility of the chart. Depending on the volatility, they'll place their stop / loss order right above the days Parabolic SAR point. Then when their trade is twice or three times what they've risked, they take their profit, regardless of the trade.

But yes, you can use a stop / loss order to lock in profits.