When we analyze our stock graphs a stock trading technique, not a guideline, Thus a discussion for future articles, we will select a price at which we will put a sell stop order whenever our purchase order is executed. A sell stop order sometimes known as atop loss is triggered when the price falls to a certain degree. After the price is hit, a market orders it could be a stop limit order, but that is also for a later discussion is automatically placed to sell your stock. The concept is that if a stock begins to trend down and strikes certain key cost factors, we will need to get out preventing additional loss.
Always use sell stop orders to protect yourself from catastrophic price declines.
If we get stopped from a stock, we should not repurchase it for a few numbers of trading days. This prevents us from jumping back to a stock we have fallen in love with too fast after getting stopped out when our emotions tell us we should have cancelled that stop order almost always a bad idea. Jumping into a Gary Fullett stock we were only stopped out of does work once in a while, but probably 90% of the time we get stopped out, the price decline is not over. In reality, often it is just starting. Take the opportunity to cool down and revaluate the inventory unemotionally prior to making a decision to purchase it back.
You cannot buy a stock you were stopped from for 10 trading days.
If a stock has gone up in price more than anticipated or is at a parabolic Rise, we must cancel our static sell stop order and put trailing sell stop orders to protect against price reversals. Trailing stop orders put a cost a particular dollar or percentage amount under the current stock price. The sell stop trigger price increases as the stock price goes up. It does not decrease as the stock price comes down. Consequently, if a stock reverses its trend, our place will be sold while we are sunning ourselves on the beach in Waikiki.
Use trailing sell stop orders to protect gains.
Bear in mind, we are trading stocks, not buying and holding them for ages. This means we will sell some very good stocks once our profit targets are met, then perhaps watch them go higher, maybe even higher. If we absolutely adore a stock and cannot stand the notion of not possessing it, we can set a core long-term position then exchange an extra quantity of stocks our trading position, giving us the best of both worlds.