If you're a normal human being, your need to feel good about yourself probably causes you to sell your winners too soon ? and -- your need to avoid feelings of regret, causes you to hang on to your losers too long.
At one time or another, we're all guilty of letting our emotions dictate our investment decisions. But the only way to succeed in the market, is to keep greed, fear, pride and hope away from your trades.
The most successful investors know exactly when they're going to sell a stock, the moment they buy it. Often they use "trailing stops" which move along with the closing price of the stock. It's a purely mechanical decision they make as an impartial observer ? and never based on feelings or instincts.
How many times has "fear of loss" caused you to sell a stock that brokeout the next day? Have you ever "fallen in love" with a stock ? "hoping" it would breakout after an initial 10% pullback, only to end up losing your shirt? Has "greed" kept you in a stock where you wanted 50%, not 20% -- only to have the bottom drop out in a week, letting your profit dissolve into a loss? Have you ever held on to a loser because you wanted to prove your initial "instincts" were right after all?
By pre-determining the maximum amount you are willing to lose on a stock or fund, you can't really get hurt. Equally important, this simple, proven strategy keeps you in a profitable investment so you don't sell too soon and miss out on profits.
In a hypothetical example, let's say you begin with $25,000 in a variety of stocks and funds. The first year was good and you made 25%. Now your portfolio is worth $31,250. You do the same the following year and now your portfolio is worth $39,062. Then the third year you lose 50%.
That would put the value of your portfolio back to $19,531 ? which is less than you started with. Just one year's loss can wipe out two years of great gains.
Now let's say you had used the "trailing stop" strategy during these years...
You had the same $39,062 at the beginning of the third year ? but ? you were using a 15% "trailing stop". As soon as the value of your portfolio dropped 15% to $33,203, you would automatically been stopped out, and would have locked in a profit of $8,203. I'm sure you'll agree, that's quite a difference!
Do this with just a few of your stocks or funds, and you can see how you can easily pocket thousands of extra dollars ? while simultaneously minimizing your losses.
The "trailing stop" strategy is a time-proven tool for completely eliminating any emotions from dictating your investing decisions. The only problem is that it requires a lot of your time and a lot of work on an ongoing basis. If you have 25 different stocks, you may have to make 25 new calculations every single day.
The GOOD news is that now there is a new software program that automatically does all the tedious calculations for you. It can prevent you from taking big hits that can hurt you ? while simultaneously letting your winners ride. Plus, you can now accomplish all this in about 10 minutes a day.
The program, "STOP-Master Portfolio Manager" is a great time saver. It monitors up to 50 positions in your portfolio. It automatically grabs current stock prices off the internet ... recalculates new trailing stop SELL prices as needed ... and completely updates your entire portfolio. When one of your positions hits your pre-determined SELL price, you are immediately signaled with a Pop-Up Alert. Then, simply instruct your broker to sell. No emotions. No needless losses. Greater gains.
? 2004 Empire Direct, Inc. All Rights Reserved
--
You have permission to publish this article electronically or in print, in your Ezine, on your Website, or in your Ebook or Newsletter as long as the Author's Resource Box is included with the article.
About The Author
James M. Clay has been a successful investor for over 20 years. He has shown many people how to use this simple technique to dramatically cut their losses, while simultaneously locking in profits. To find out more, please visit: http://www.automaticinvestmentprotection.com
http://www.automaticinvestmentprotection.com
Lincoln Stretch rentals Alsip ..For some "long term" would mean holding a stock position... Read More
If you've ever flipped on the television to CNN Financial... Read More
Wall Street has been preaching the doctrine of Buy and... Read More
Are you paying any attention to your retirement savings? Do... Read More
Have you been listening to the talking heads on CNBC-TV?... Read More
Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More
How many people went to a cash position this week?... Read More
I'll bet with almost anyone that has stocks or mutual... Read More
Sometime in the third quarter of 1997, someone told me... Read More
There is so much involved in developing peak performance, that... Read More
Peter is a professional trader, Paul is not. Peter has... Read More
When it comes to 401k's there is an overabundance of... Read More
One of the great truisms of Wall Street is "Don't... Read More
You've decided to try your luck at trading stocks or... Read More
People are always asking me when should I sell my... Read More
Among the largest forces that affect stock prices are inflation,... Read More
Everybody is riding the Wall Street Roller coaster. Even if... Read More
One of the big advertising kicks today from mutual funds... Read More
Mutual funds by definition are a mixed bag of stocks,... Read More
As the man said, "I've got some good news and... Read More
This is the continuing story of our two imaginary traders,... Read More
I am hearing predictions by brokers, financial planners, talk show... Read More
With all the bad news that has been dumped upon... Read More
Did you run out to buy that duct tape yet?... Read More
It has been said that low cost or even free... Read More
Western Springs shuttle limo ..Day trading is all about making buy and sell decisions.... Read More
Wall Street has been preaching the doctrine of Buy and... Read More
The basis of diminishing return discussions surround such simple notions;... Read More
Dollar cost averaging is one of the most popular ideas... Read More
Let's assume that you want to make some serious money... Read More
If you've ever flipped on the television to CNN Financial... Read More
What account size do I need?How much money can I... Read More
Well maybe that's overstating it a little, but it's certainly... Read More
(1) CHK stock price $16.74, NAV $32.5CHK is my favorite... Read More
When will the stock market stop going down and start... Read More
1. Do not spread your money too thin.My friend has... Read More
On Monday, November 25, 2000 Investor's Business Daily listed on... Read More
What the heck am I talking about?It is often said... Read More
Disclaimer: Please note that I do not necessarily purchase, own,... Read More
When most analysts, financial planners, fund specialists and investors try... Read More
All of the talking heads have been telling us that... Read More
Right now there doesn't seem to be any "gold fever".... Read More
Sometime in the third quarter of 1997, someone told me... Read More
"If you don't know where you are going, any road... Read More
Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More
In a previously written article, we expanded the use of... Read More
There are major differences between trading stocks and trading futures.... Read More
Before they go over the cliff to their destruction these... Read More
Even if you don't own any of their stock or... Read More
Ever notice how behavior in one area of life can... Read More
Stocks & Mutual Fund |