Thursday, October 15, 2009

Securing Your Profits

People who ride their stocks up and down like roller coaster are merely just going from red to green over and over and in the long run it gets risky. In this economy you never know what companies may tank. Remember Fanny and Freddie? That was a disaster. As long as we are following the theories of keynesian economics, really anything can happen at anytime.

Unfortunately my investment with SLV ended today. But not to worry when SLV gets out of this valley and prices start climbing again I will be willing to buy again. But for now an extra $320.02 in my pocket will be welcomed. So here is how I secured my profit. I purchased SLV for 15.88 on September 25th. This week SLV was having a difficult time closing over 17.50 so I had reason to believe that SLV was going to turn around soon. And it did.

Last night I moved my stop up from 17 to 17.20. I Enjoy my job but the problem with it is I cant monitor my investments through out the course of the day and I love trading! So my thinking last night was to secure more of what I had. The way is it allows you sell a stock at a price you are comfortable with. For example a stop at 17.20 means if the stock drops below 17.20 as seen today just before 1( I would say lunch time but I go for lunch at 2), my stock will automatically sell at 17.20 giving me my profits today.

Another way to secure profits is with a trailing stop. In a trailing stop, the stop will follow the price of the stock and sell when that stock reaches that stop price. At one point I had purchased CTCM for 5.53, ( this is going back, this is one of the few times I used a trailing stop. ) when CTCM reached 12.50 I put a .50 trailing stop on it. In other words if CTCM is being traded for 12.50 my .50 trailing stop was at 12. when CTCM reached 13, my trailing stop moved up to 12.5. When the stock price moved up to 14 my trailing stop moved up to 13.50. Then when CTCM's stock priced dropped down to 12 dollars, CTCM automatically sold for 13.50 where as if I just left a regular stop at 12 I would have lost that extra 1.50 points of profit. Since I go big 1.5 can equal a lot of money. Why use stops to secure your profits? because if the stock crashes you will get out ahead with profit opposed to loosing everything.

The moral of the story is use stops to secure your profits and get out while your ahead.

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