The cost of stocks can go down, as well as up. What’s required is an exit method that will permit you to survive the bad stocks, and make a nice profit on the good stocks. The system that I’ve found to work the best is a trailing stop loss. For people that have no idea what a stop loss is, we will explain quickly.

There are two ways of doing this. Work out the cost of the stock at this level and set that as your stop-loss. As the cost of the stock increases, keep moving the level of the stop up to keep the percentage opening the same. Some brokers provide a trailing stop loss service, where you tell them what percentage to set the loss at and they do it for you.  The markets have a tendency to flow in stages. A stock rising will reach a top, and then dip back down. It may do this many times at each stage.

The idea is to follow the chart of the stock and see where the dips are the lowest, and set the stop loss slightly below them. A second part which Nicolas propounds is that when the stock breaks out of the sideways trend, to buy more of the stock, and when the stock starts going sideways again to move the stop loss up again to just below the lowest part of the dip. Using the stop loss as an exit system, only works if you stick to it, and not lower it, thinking that the price will go up again in one or two days. In some cases you’ll be right, but what usually occurs is the price keeps moving against you, and you loose even extra cash. There are times when the markets goes thru a fast fall in price, there are rules about how far a price can fall in one-day. In order that they aren’t a shock when they do happen to you.

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