Today is the kind of market day where our stop loss mantra comes into better
focus. Remember that at some level, tight or wide, you will be well served
by stop loss orders on your positions. The 2008 debacle didn't hurt so much
for those with stop loss orders.
Setting the stop loss as a trailing percent or a fixed price amount is a matter
of choice and frequency of attention to prices. We prefer trailing percentages.
Selecting the stop point or percentage is a matter of personal choice and
some degree of art, but to be well done, it requires access to good chart data
(unless you wish to put on arbitrary percentage of positions, which is OK,
but perhaps too crude).
The attached spreadsheet provides links to multiple charts, each of which
could be useful, and which collectively are definitely useful, in choosing
stop loss points or percentages. It also contains a recommended list of securities
to examine through those charts to get a world view of markets.
Over time, you will probably find that you prefer one chart over the others,
or one indicator on a chart over the others to set stop loss points, but before
then, here is a good collection of useful aids.
I look forward to discussing stop loss orders and the use and interpretation
of these charts with you.
Disclaimer: Opinions expressed in this material and our disclosed positions
are as of July 5, 2010. Our opinions and positions may change as subsequent
conditions vary. We are a fee-only investment advisor, and are compensated
only by our clients. We do not sell securities, and do not receive any form
of revenue or incentive from any source other than directly from clients. We
are not affiliated with any securities dealer, any fund, any fund sponsor or
any company issuer of any security. All of our published material is for informational
purposes only, and is not personal investment advice to any specific person
for any particular purpose. We utilize information sources that we believe
to be reliable, but do not warrant the accuracy of those sources or our analysis.
Past performance is no guarantee of future performance, and there is no guarantee
that any forecast will come to pass. Do not rely solely on this material when
making an investment decision. Other factors may be important too. Investment
involves risks of loss of capital. Consider seeking professional advice before
implementing your portfolio ideas.
IMPORTANT NOTE: We are a Registered Investment Advisor. We do not sell
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