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Why We Don’t Use The Stock Market Trading 7-8% Stop Loss Rule

InvestorEducation / Learn to Trade Mar 31, 2012 - 02:07 AM GMT

By: David_Grandey

InvestorEducation

The recent action in SWI and notes in the chart below are why we don’t use the 7-8% rule.


We’ve seen it way too many times where we’d buy it right, nail it and get stopped out for no reason. Sometimes there is more to it than just a simple set an X% stop and that’s that. Markets are ever changing and especially in today’s climate dominated by black box trading and high frequency trading hedge funds not to mention the trade bots out there.

The biggest point we want to make about this is before you stop out at an X% stop you had better look where support levels are and particular moving averages that act as supports too as you sure don’t want to stop out at an X% stop and find out only later that if you would have looked where support is you never would have stopped out. So knowing this no longer do you ever have to get ticked off because you got stopped out only to see it reverse without you.

As for SWI currently? At this moment in time the right thing to do was NOT set the 7-8% stop as the stock has since reversed without you had you did that. But as we’ve said time and time again around here that trading and investing is more of an art than it is a science and one needs to remain flexible

By David Grandey www.allabouttrends.net

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    David Grandey is the founder of All About Trends, an email newsletter service revealing stocks in ideal set-ups offering potential significant short-term gains. A successful canslim-based stock market investor for the past 10 years, he has worked for Meriwest Credit Union Silicon Valley Bank, helping to establish brand awareness and credibility through feature editorial coverage in leading national and local news media.

    © 2012 Copyright  David Grandey- All Rights Reserved

    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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