Most of the talk about stops seems to be coming down on the side against them. They do have their place. If you are ready to get out of a stock, there is nothing wrong with placing stops and raising them if the stock goes higher. IMO, lowering stops defeats the purpose.
Once your stop is hit, forget about it. All further investments at that point are from ground zero -- it doesn't matter the price at which you were "stopped out." Your next investment may be in the same stock you just exited, or it may be in another, but your next buy decision should be based on which stock you feel has the most potential, without regard to any stop recently hit.
If one is using stops to try to get out at a peak, it is a risky strategy. Better to sell into euphoria when you find your mind saying things like "if this thing can just double in the next three months, I 'll be on easy street." If the charts coincide with your feeling (check MACD and Stochastics), then just sell.
But, although I will get out of a stock when I feel it is very richly priced, I tend to buy and hold. If you look at the long-term charts of AOL, MSFT, DELL, and CSCO, you'll see that the occasional downdrafts amount to no more than blips on a radar screen. It just seems worse because you have so much more damn money than you had before, and instead of thousands you are seeing your portfolio drop by tens or hundreds of thousands in a very short time frame. Forget about it.
Long AOL and happy.
INTCfan |
