When we go to the circus we see a trapeze artist working on a high wire or swing either alone or with other athletes. They know what they are doing because of constant practice, but every once in a while there can be a mistake, even a small one that can cause one of them to fall. The result is death or serious injury when they hit the ground.
When you look below them you will see a net. Thank goodness. No one wants to see them get hurt. As expert as they are they take precautions. In almost every profession or athletic event there is some kind of safety net available and this is true in the stock market for all investors. There is never any reason for investments to fall to the point the investor is hurt. Is there a net that breaks that fall and keeps the investor from losing all or part of his money? Yes there is.
It is called a Stop Loss Order. Brokers don't like them and never recommend them because it means he must watch your account and the average broker has too many customers to do that. However, you can instruct him to place an Open Stop Loss Order that means it is automatically in every day protecting your shares from loss. If you are not allowed to place this kind of order you should move your account to another brokerage house. They obviously don't care about protecting your money.
Let me give you an example. Suppose that last year you bought Cisco Systems (CSCO) at $50 per share. The first question to ask yourself is how much am I going to risk in case this stock goes down instead of up? You put up $5,000 and bought 100 shares. How much are you willing to risk? $500. $1,000. More? Well, today it is about $15 so if you did not have a loss protection you would be out $3,500 and that is too much. The Stop Loss Order is your Safety Net! If you don't have one you can be seriously hurt. One of the basic rules is never to lose more than 10%. Look at what you own to see if you would have more money today if you had placed a Stop Loss Order just below the highest closing price for your stocks. I know you would be money ahead.
There are literally thousands of stocks that have lost 80% and 90% of their value. For those poor people (pun intended) who did not have a safety net they are badly hurt and some are just about dead. Sorry, folks, it did not have to happen.
I don't care what you own. Now you should immediately look at everything in your portfolio and decide where you need to place those stops. If you don't put a net in place you could be hurt.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
eco-friendly cleaning service Arlington Heights ...Inverted interest rates? What's that? Who cares? Even if you... Read More
Investing in long-term financial vehicles give you the most gains... Read More
Before they go over the cliff to their destruction these... Read More
Reach in your pocket and take out that big roll... Read More
During the month of January the Dow Jones Industrial Average,... Read More
If there is one term over-used when talking about making... Read More
Ever done any whitewater rafting or canoeing? Long periods of... Read More
Before you embark upon a journey of trading stocks or... Read More
"Buy and hold" is one of the most heralded investment... Read More
An investor can find and research the best stock on... Read More
How often have you come across an advertisement or e-mail... Read More
Regardless of the fact that the world's stock markets have... Read More
It is commonly reported that the stock market averages about... Read More
When we go to the circus we see a trapeze... Read More
Much like the middle child, mid-cap stocks have long struggled... Read More
Checked your 401K lately? Going back to about a year... Read More
The Macedonian Stock Exchange (MSE) is not operating successfully. True,... Read More
The Surgeon General of the United States says that smoking... Read More
Index Fund Trading can be one of the most profitable...or... Read More
The Shadow knows. Remember him? It seems a shadow has... Read More
You have decided to buy some stock or mutual funds,... Read More
Did you know you can make money (and a lot... Read More
Four blind men were asked to give a description of... Read More
This is a guide to the different types of mutual... Read More
The date October 13, 2000 will forever be embedded in... Read More
expert residential cleaners Northbrook ...Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More
If you are serious about making and keeping money by... Read More
If it walks like a duck, quacks like a duck... Read More
The demand for world oil is increasing while world reserves... Read More
Wall Street's watchword has always been diversification, but what does... Read More
You have heard about a particular mutual fund from a... Read More
Picking a beaten-down stock requires a different kind of selection... Read More
There are formulas for just about everything, but it has... Read More
A stock market index is a statistical measure of changes... Read More
Day trading is all about making buy and sell decisions.... Read More
Everyone who invests in the stock market wants to be... Read More
The Law of Chaos is the theory of random unpredictable... Read More
The stock market can present you with a lot of... Read More
Outlined below are some of the advantages and disadvantages of... Read More
How do you make money without picking tops and bottoms?I... Read More
The Shadow knows. There used to be a radio program... Read More
If you have talked to a stock broker or financial... Read More
Question: How does it get better when it gets worse?Last... Read More
In one of my previous articles (Investing in the stock... Read More
Exchange Traded Funds (ETFs) are growing. Investors are choosing low... Read More
One of the greatest challenges of investing in stocks is... Read More
Ever wondered what is a mutual fund? A mutual fund... Read More
Because you don't feel too sure about which stock or... Read More
Every stock market investor faces one primal enemy. An enemy... Read More
An insane person cannot evaluate an insane evaluation system.As you... Read More
Stocks & Mutual Fund |