investing guide

Trailing Stops

investing freedom

This is as good as it gets when it comes to investing freedom and control. Trailing stops allow you to basically trail a stock as it goes up in price, and then when it comes down in price it triggers your trailing stop order.

Confused??? Of course you are so here is an example:

You buy XYZ stock at $5.00 a share.

You can then put a trailing stop on that order for whatever you want either by percentage of the current price or points. We will use points for this example.

So you paid $5.00 a share and you do not want to lose more than .15 cents a share on this stock purchase. So you put in a trailing stop order for .15 points, which is $4.85, right after you buy the XYZ stock.

What occurs now is that for every cent the stock goes up your trailing stop will follow that stock. So if the stock climbs to $5.10 your trailing stop now becomes $4.95.

However, if the stock now comes back down in price your trailing stop freezes at its current price; until the current stock price either hits $4.95 and sells the stock automatically, or the the stock climbs back up past your .15 point trailing stop order.

The beauty of a trailing stop is it allows you to place an order without having to monitor your stocks every single day. It also locks in profits on huge gains when otherwise you might have missed them; if you were relying on yourself to sell the stock.