| trailing stops, and if you’re not using one to protect your stock positions, you should be...a trailing stop is simply a stop-loss order set a certain % below the market and then adjusted as the price rises...after buying a stock at $14, you would immediately place a sell stop at approx $12-$10, 15% [max 25%] below your purchase price, under no circumstances should you lower your stop any further... it’s there to protect your principal...you should adjust it upward as the stock begins to rise...traders, who are short-term oriented, will always want to run their sell stops closer than long-term investors, but even a short-term trader shouldn’t run his stops too close to the market...why? because no stock moves up in a straight line, and you don’t want to get knocked out of a winning stock while its just going through its normal ups & downs...without any kind of sell strategy, emotions takeover and emotions are almost always losers... having a trailing stop strategy, you can now down your emotion-driven trading errors... it cures greed, eliminates fear, and does away with wishful thinking… trailing stops are a very effective way of managing risk, if you don’t have a sell discipline, you’re probably flying by nite....and in the world of investing, that’s the number one cause of pilot error |
