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Halliburton Under Fire
The shareholders of Halliburton are trying to stop state-sponsored terrorism, using the same economic leverage that was effective against South African racism in the 1970's. Back then, shareholders used corporate resolutions to stop companies...
Is your mutual fund the right one for you?
Mutual Funds are considered to be one of the best investments one can get hands on. They're very flexible and cost-effective. An excellent investment for people with restricted knowledge, time or, money. For beginners, who might have a perplexed...
MUTUAL FUND PERFORMANCE AND WHY THERE ARE NO DICE COUNTERS IN VEGAS!
A way that investors get ripped off and in a sense rip themselves off is based on the culture of performance in the mutual fund industry. If you stop and think about it there is absolutely no reason that the past has to equal the future. If you have...
Risk and Reward Investing
If you are doing your own investing in the stock market, what would be the first question you would ask yourself before you make any trade or investment? If your answer is how fundamentally sound the stock is, or whether the stock just broke out of...
Simple Strategies to Making Financial Gain
Now is a great time to make it a habit to manage your resources
instead of your resources managing you. What is meant by that
when we are stating that "Your money manages you?" Here is a
well known example:
There is more month than there is...
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STOP LOSS ORDER METHODS
THE ALCHEMIST by AL THOMAS
STOP LOSS ORDER METHODS
We have established why a stop loss order is a requirement for the successful investor. Now let’s look at some of the simpler methods.
There are 3 basic methods (and many more we will not discuss here) for stops that almost anyone can master. They are percentages of
the price action, moving averages and support areas. These cannot be covered in detail here, but you can do further research on your own.
Any stock, fund or Exchange Traded Fund (ETF) you buy you think is going to go up, but there is the chance that it may go in theother direction. The stock you buy is $50 per share. You certainly don’t want to hold it while
it goes to $25 or $10 as many did in 2000. Your first thought should be how much am I willing to risk if I am wrong and that is called your loss limit. Let’s pick an arbitrary amount of $5.00 per share. That’s 10%. If it goes down that is the maximum amount you will lose and you still have 90% of your money remaining to find a better
investment. When it goes up you will want to protect your profit by moving the stop up.
When an equity advances to $55.00 your stop of 10% should be moved to $49.50 that is 10% of $55. When it goes to $60 your stop is now $54.
Nothing complicated here. There have been many stocks that gone from $20 to $250 and then down to $2.00. Think what a stop loss would have done for you in that case.
As I have said before never buy anything unless it is going up. That same $50 stock was moving steadily higher in a rather narrow trading range. If you decide to use a 20
day moving average you will have to do the calculations either daily or weekly. You add up the
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closing prices for the past 20 days and divide by 20. This should be done once each week and the number calculated is your stop loss. Again nothing complicated. The steeper the advance the shorter should be the number of days for the moving
average. If you are lucky enough to have one of those skyrockets you might even be down to a 5DMA. Some traders use a 50 day MA and others even a
200-day MA. Mutual funds lend themselves to the latter,
Finding support and resistance points requires a more sophisticated approach. This is
something you are going to have to study. There are many places on the Internet that have short explanations with examples of how to determine
these points.
Briefly you watch a stock, fund, ETF run up and then you see it stop and set back like a stair step. It will rest for a while with a short up and down sideways pattern that forms
before the next move higher. Your stop should now be down at the point the recent up move started. When it advances again this current formation
becomes the stop loss point. This is not
mechanical and requires a more experienced trader to determine these points. Once you learn this technique you will also begin to see the
orderliness of the market.
The mastery of an exit strategy with stop loss orders will immediate put you in the top 10% of all investors. Learning how to sell is the
key to successful investing.
About the Author
F*R*E*E investment letter www.mutualfundmagic.com
Author of best seller "IF IT DOESN'T GO UP,DON'T BUY IT!" Never lose money in the market. Copyright 2004 Albert W. Thomas All rights reserved.Former 17-year exchange member, floor
trader and brokerage company owner.
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