I’m not all that sophisticated an investor and mostly I am in mutual funds for the long-term. But I do buy stocks and have been kind of successful selling stocks when I get to a 20% gain and buying more share if they fall 20%. To do this I use a lot of limit orders. If I buy a stock at $100\/share, I can put in a sell order that day for $120\/share and a buy order for $80\/share. If the price falls 20% I automatically buy more. If it goes up, I automatically sell. I like this because it keeps me from getting greedy and I don’t have to watch the market all day (or at all).<\/p>\n
I bought some Goldman Sachs like this and when it went down 20%, I bought more, which I then sold when it went back up. Goldman has been on a yo-yo, so I’ve been able to buy and sell three times for a 20% profit each time. But I didn’t reach a 20% gain on the original shares until recently. My intention was to hold on to GS because I felt like its long-term outlook was very good and it could make a lot more than 20%. Still, it could also zoom right back down. Today it was up quite a bit and I’m into the 30% gain range. I didn’t want to sell if it would go up some more, but I don’t think I want to allow it to get below my 20% gain mark either.<\/p>\n
So for the first time I am using a “trailing stop”. This sets a sell price a certain amount below the current price and the sell price adjusts upward as the stock price goes up. For instance, today GS was up to $105\/share. So I entered a 5% trailing stop meaning if it goes down 5%, I will sell (basically at $100). However if the price were to go up to $110, the new sell price would be 95% of that, $104.50. If it goes up steadily forever, I will never sell. But if it goes down 5% at any time, the shares will sell. They could sell tomorrow.<\/p>\n
What’s worse, if the stock market futures go down tomorrow morning before the market opens, Goldman Sachs might open at $90\/share and, because that is at least 5% below my target price, the shares will be sold instantly at $90.<\/p>\n
So there is risk all over the place. First, there is a risk the stop could trigger below my set price. Second, there could be a 5% blip downwards tomorrow before the stock goes back up again, and I would have sold and missed the rebound. Third, I could have sold the stock today at $105 and been done with it. So if the stock sells below $105, then I haven’t really gained anything at all by using a trailing stop. If I can somehow beat that price, then I might become a fan of trailing stops.<\/p>\n
If the price goes up another $10 or so, I could change to a 10% trailing stop so that the shares wouldn’t sell on a volatile day.<\/p>\n
I’ll let you know how this works out.<\/p>\n","protected":false},"excerpt":{"rendered":"
I’m not all that sophisticated an investor and mostly I am in mutual funds for the long-term. But I do buy stocks and have been kind of successful selling stocks when I get to a 20% gain and buying more share if they fall 20%. To do this I use a lot of limit orders. … Continue reading “Trailing Stop”<\/span><\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-433","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/posts\/433","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/comments?post=433"}],"version-history":[{"count":0,"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/posts\/433\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/media?parent=433"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/categories?post=433"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fiveforks.com\/ted\/wp-json\/wp\/v2\/tags?post=433"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}