Trailing Stops Tested

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Trailing Stops - How I Track Them... And How You Should, Too By Dr. Steve Sjuggerud

My two basic rules for consistent investment success are as follows:

1.) Buy something of extraordinary value when nobody else wants it.
2.) Don't lose money... use trailing stops.

Good investors concentrate their time looking for #1 above. But great investors concentrate on both #1 and #2.)

"Don't lose money" sounds flippant. But it is tricky business. A good money manager can't just buy smart... he's got to sell smart too. It is my opinion that most investors - even professionals - don't have a clue when to get out when they get into a position.

Today, I'll show you a simple "worst-case" rule for when to get out - using trailing stops. And then I'll show you the software that I use to track my trailing stops myself. It's inexpensive, easy to use, very good and free to try. You ought to give it a shot...

Why Use Trailing Stops...

People don't have a plan to get out of an investment. So they risk being stuck in a position where a stock they own is down 50%... and they need it to rise by 100% just to get back to break even. Only the stock continues to fall...

They may even find themselves in a position where a stock has fallen by 90%. But by the time it's down 90%, it has to rise by 900% just to get back to break even. That's asking a lot.

What I mean when I say "don't lose money" is: "Don't put yourself in a position for a catastrophic loss." You can generally avoid being down 50%, or 90%, with a simple strategy I recommend to readers of my newsletter, True Wealth.

The simple strategy is called a trailing stop. As a very rough rule of thumb, I recommend a 25% trailing stop. Here's how trailing stops works:

Let's say you buy a stock at $10, and it rises to $20.) If it falls by 25% down to $15, you sell, no matter what. It is a way to cut your losers early and let your winners ride. It is an excellent last-gasp "safety" to get you out of a loser that you don't recognize (or aren't yet willing to recognize) as a loser.

I make a point to always set my exit points right when I decide to buy something. Now it's easy to tell you this. But it's another thing to try and track it...

The Software I Use to Track My Trailing Stops

Let me tell you, I've tried everything. You can't imagine the investment services I've subscribed to. I've used services that can and do run upwards of $20,000 a year (including Bloomberg, and Ned Davis Research, for example)...

But what I use to keep track of my trailing stops is a tiny little program called XLQ Companion. It lets me track my trailing stops and tells me how far below the closing high the stock is.

I think the creator of XLQ Companion envisioned it as a total portfolio management program. You can use it for that. But I just use my brokerage account as my portfolio tracking page, and I use XLQ Companion just for my trailing stops.

Beyond the little XLQ Companion program, the actual XLQ program is phenomenal. XLQ is an amazing creation that allows you to manipulate stock data in Excel. I use it for research and for tracking my stocks, their fundamentals, and whether they're above or below their moving averages right now. Every time I open Excel, all the data and formulas are updated. Investment U Vice President Brian Hunt uses the Average True Range function of XLQ as part of his Microcap Moonshots research. It's really valuable.

Good investing,

Steve

About the Author

Dr. Steve Sjuggerud is editor of the True Wealth and Investment U newsletters, and serves as President of Investment U and the Oxford Club's Investment University. He helps people become better investors with actionable investment advice they can put to use to build their portfolios, such as the trailing stops article above.

Comments

Look! Bewbies! 22.08.2011. 15:52

How to test drive used 1996 jeep cherokee? What should I look for? What's the correct way to test the 4x4 controls? I've never used them before (only drove a jeep once or twice in the past).

Is a sluggish acceleration normal for an older jeep?

Look!  Bewbies!

Admin 22.08.2011. 15:52

Not really enough info. This is a 15 year old unibody so if its been offroad alot I'd give it a miss. but if the price is right and you're going to hit the trails with it, just make sure then engine sounds good with no leaks, drive and make sure the gears shift, all the lights turn on, look underneath for damage, and it stops without squeeks or pulling. take it in the dirt and make sure the FWD works. That's pretty much it on something that old.

Admin

R L 21.10.2010. 21:36

How to solve for the kinetic friction and the coefficient of kinetic friction? I'm really stuck on a physics question in my textbook for homework.

A 650 N stduent is Rollerblading at a velocity of 7.8 m/s [w] when the student trips and slides horizontally along the trail, coming to a stop in 0.95 s.

What is the kinetic friction as the student slides?
And determine the coefficient of kinetic friction between the student and trail.

Please help me solve this. Its very appreciated.

R L

Admin 21.10.2010. 21:36

They are testing to see if you know the relationships between: friction - forces - speed - acceleration.

Calculate the acceleration of the skater - change in speed / change in time. Deceleration is minus acceleration.
Calculate the force needed accelerate the skater (force = mass * acceleration).
Calculate the coefficient of friction from the acceleration force and the weight force. (acceleration force = friction force, friction force = coefficient of friction * force due to weight)

By definition, the coefficient of friction calculated will be the coefficient of kinetic (moving) friction

Admin

Cathy 13.02.2012. 03:24

Why hasn't enough people signed the petitions to stop the law Obama passed to test these chem-trails on us? There are many sites that need your attention please help our air and water. These chemicals don't stop in the air. Killing trees and wildlife all over the world. Come on we all have to do something.

Cathy

Admin 13.02.2012. 03:24

heres your tin hat, no law exists and neither do chem trails

Admin

Cassia 06.11.2010. 23:49

Is there anyway I can get tested for lupus without my fathers consent? I?m currently 15, and my father won?t get me tested for lupus even though my mother has it. I show signs of Lupus, and my mother wants to get me tested (my parents are divorced) what should I do? How can I get these tests done, just to be sure, without my fathers consent? Is there anyway?
I have no "doctor", and i have these symptoms:
Painful or swollen joints and muscle pain
Unexplained fever
Red rashes, most commonly on the face
Chest pain upon deep breathing
Extreme fatigue
And Swelling (edema) in legs
mouth ulcers

Cassia

Admin 06.11.2010. 23:49

Cassia,

This is really a question about custody and who pays the medical bills (who has the health insurance) Some insurers require that you take a form with you to the doctor. If that is not the case, why can't your mother (divorce or not) authorize your doctor's appointment. If you are not sure of the procedure, ask your mother. She should have the answers.

Just because you have some symptoms, does not mean that you have Lupus even if your mother does. 4/11 symptoms should be seen.
* Painful or swollen joints and muscle pain
* Unexplained fever
* Red rashes, most commonly on the face
* Chest pain upon deep breathing
* Unusual loss of hair
* Pale or purple fingers or toes from cold or stress (Raynaud's phenomenon)
* Sensitivity to the sun
* Swelling (edema) in legs or around eyes
* Mouth ulcers
* Swollen glands
* Extreme fatigue

The first test, a blood test, is not that expensive although it is also not type specific.
http://www.uklupus.co.uk/fact3.html
http://www.lupus.org/webmodules/webarticlesnet/templates/new_aboutdiagnosis.aspx?articleid=364&zoneid=15

Has your father provided a reason for not wanting you to be tested? Is he in denial? Afraid that if he allows the test it will be positive but that if he withholds permission, you will not have Lupus? Is he the sole payer for your medical expenses? Is he trying to "get even"with your mother. Lupus is not curable but it is treatable. Treatment is very important to both control the disease, to help with symptom relief and to stop the development of serious organ damage.

If you father knew you had the lupus, would he withhold treatment? If so this might be a matter for the Court system but your mother would have better answers.

Is your father aware that if you do have lupus it can affect your skin, heart, lungs, kidneys, joints, and nervous system? When you next talk to your father in person, have him take this Lupus knowledge test:
http://arthritis.about.com/library/quiz/blquizlupusknow.htm

What is frustrating is that parental consent can be bypassed in regard to birth control, STDs
Take a look at the chart below which is specific to the State of Washington but may provide some insight. Note especially the Mature Minor Doctrine.
http://www.washingtonlawhelp.org/documents/216941minors_health_care_rights.pdf?stateabbrev=/WA/

Have you provided your father with anything in writing. If not - do so now. Here is an online Lupus test (designed only to tell you if you should be seeing a doctor for more testing. If the results are printable, take the test and print the result. If they are not printable, do a cut and paste. I have to say this but you need to begin a paper trail.
http://arthritis.about.com/od/lupusthebasics/l/bllupusquiz.htm

Try to enlist the aid of other adult relatives. If that is not a good option, you may have to resort to talking to school counselors or the school nurse to see what you can do. But first, call your doctor's office or have your mother do so. Schedule an appointment.

Because we are not talking about an infectious disease but rather an autoimmune disease, your legal footing for having the testing without parental permission may be shaky unless your mother's consent will be sufficient.

We could be more specific if we knew where you lived and the other details. There are some local organizations which may still offer free testing, which means that you might only need your mother's permission.

Admin

Inquirer 31.07.2012. 14:47

What should i look for if i purchase a bicycle on Craigslist? I plan to ride the bicycle both on trails and on the road. I am an adult male but honestly riding a bicycle has not been my forte. Someone told me that height is important so i should get one that reaches my waistline; one that has broader wheels as they mitigate bumps on trails. But what about the appropriate speed? Is there any other consideration i should include if buy one on craigslist?

Inquirer

Admin 31.07.2012. 14:47

1) To learn what size bike you need - see a real bicycle shop now. Looking & asking questions is free.
2) Figure out what type or style of bike you need - not want - NEED!
3) A bike with 24 gears will use the better "freehub & cassette" vs. the old & out-dated "freewheel hub". http://www.sheldonbrown.com/free-k7.html
4) Double wall rims vs. weaker single wall rims.
5) Before even test riding any used bike - spin the tires to see if the wheels turn true. No side-to-side or up & down wobble.
6) Grab hold of crank arm. Try to shake it up & down or back & forth. Any movement beyond a tight circular motion - run away. Bad bottom bracket.
7) A long test ride. Shift through as many gears as possible. They should all catch cleanly & smoothly. The brakes should stop you quickly with no shaking or squeaking.
8) As previously mentioned - most are way over-priced. Negotiate. negotiate & negotiate some more. Don't be afraid to haggle or challenge the owner on the actual worth of the bike.
9) Many times - the actual list price (when new) is listed on BikePedia.com. http://www.bikepedia.com/ Figure half the original price & then deduct 5% off for every year.
10) Look for bikes that sold only through a real bicycle shop...a Raleigh, Giant, Trek, Specialized, etc. Avoid anything originally sold through a discount or big box store.

Admin

slappyjk 28.04.2013. 14:44

What causes someone to stop developing (mentally) beyond the age of 15? I have a 52 year old sister who is mentally at age 15, per a psychiatrists observation. Her world is about her pets and childish things, she is emotionally 15 years old.

The problem is, she is in total denial of this, has become a professional hypochondriac; anyone who brings her down to reality, she shuns them; you either believe her fantasies or you are against her. For the last 30 years, she has bullied her parents, who are now in their 80's to do whatever she wants.

Her personality appears to be narcissistic; reading the Wikipedia definition of a narcissist, she scores an eleven from every category of a narcissist in a 1 - 10 scale. Every trail of a narcissist defines her.

She absolutely refuses to acknowledge her mental issues, claims its all physical, for the last 15 years she claims she has Lupus but it appears she is faking it, so she can't be forced to get a job, she has not had a job, in the last 25 years; lives off her parents and friends, with no shame.

Since I don't believe her fantasies, I am her enemy; recently she made up an allegation I had stolen $2000 from her, on my own, I took a lie detector test, to prove to my mother, I had not stolen from her; my sister refused to take a lie detector test, even though I will pay for it.

This sister now lives with my parents, has become the gate-keeper, answers their phone, will not allow anyone to see my parents without her being in the middle of the conversation.

I don't know what to do, a person who is deeply mentally ill who refuses to recognize her problems may never be helped.

What condition is it for a person who is not technically retarded but emotionally is at a level of a 15 year old?

I am sure she could benefit from an objective therapist but she surrounds herself with enablers, who feel sorry for her.

It would help if someone has some insight how to treat this person?
A- you have it wrong, I went 10 years without any contact with my sister, I would be happy to never speak to her again. My issue is that she lives with my parents, controls their lives. No way am I an enabler, my mother is the key, she believes anything my sister says.... my sister is a con artist, who believes her own lies. As an example, one of the cons my sister claims- she wrote some novels and tells everyone she is an author; she goes on radio shows claiming to be an authority of ghost stories but there is no chance her novels will ever be printed or read; she has done over a hundred radio shows, claiming to be an author of ghost stores; she has conned her way onto 2 cable TV shows, pretending she had an experience, seeing a ghost.

If my sister did not live with my parents, I would have no issue with her, she can do whatever she wants but she has created such a division, all other family members can't call my parent's house; the rest of us are concerned she will make up
A- you have it wrong, I went 10 years without any contact with my sister, I would be happy to never speak to her again. My issue is that she lives with my parents, controls their lives. No way am I an enabler, my mother is the key, she believes anything my sister says.... my sister is a con artist, who believes her own lies. As an example, one of the cons my sister claims- she wrote some novels and tells everyone she is an author; she goes on radio shows claiming to be an authority of ghost stories but there is no chance her novels will ever be printed or read; she has done over a hundred radio shows, claiming to be an author of ghost stores; she has conned her way onto 2 cable TV shows, pretending she had an experience, seeing a ghost.

If my sister did not live with my parents, I would have no issue with her, she can do whatever she wants but she has created such a division, all other family members can't call my parent's house; the rest of us are concerned she will make up

slappyjk

Admin 28.04.2013. 14:44

You say she 'surrounds herself with enablers who feel sorry for her'. I think it is the other way around. Everyone feels sorry for her and end up enabling her in a variety of ways. And I think you maybe one of her enablers too!.
If she is not putting herself or your parents in any harm's way then there is nothing to fix.
It doesn't sound like could hold down a job because she doesn't know how to get along with people in general. Her anti-social behavior is part of her illness.
Rather than spending so much time and emotions trying to get her to change, you would benefit from some counselling. It would help you figure out a better way to have your own life and be less entangled in your sister's problems.
You and the other members of your family who are 'involved' should get some professional advice and counselling on how to handle your parents' affairs if they should get sick and need more help than what their present situation with your sister provides for them.
Also if something should change in that household either with your sister or/and your parents, you all need to know how to deal with all the legalities.
Don't wait until it reaches a crisis point with your sister and parents!

I hope you can learn to detach more from all this craziness with your sister because you will never 'win'!

Admin

ForgeTheBlade 02.06.2013. 17:49

What rights does an arrested and jailed undocumented man have? In Colorado, an undocumented man drives into a Motel 6 parking lot at around 4am and pulls up to a parking space. He is with his girlfriend. Strangely, there are 6 police cars around the perimeter of the motel. The man gets off his truck with his girlfriend, both getting off from the driver's side and a police officer walks up to him and asks him what he is doing there and rudely yells at the girlfriend to step aside while he asks the man to take a breathalyzer test. The man speaks very little English and it is difficult to understand him but he tries his best to answer the questions prompted by the police officer.

However, the police officer doesn't even let the man finish answering his questions and handcuffs him after convicting him of driving under the influence of alcohol. This man, however, was not in a vehicle when he was questioned by the police officer, and the police officer had no reason to suspect that the man had done anything wrong. He is now in a county jail with a DUI conviction and he does not have a US driver's license or any US identification.

After arresting him and taking him to jail, the police officers came back and searched (more like raided) the man?s truck without any warrant leaving it a mess and vandalized. What will happen to him? Can anything help his case?

What rights does an arrested and jailed undocumented person have?
@ Lisa A, His Miranda Rights were not read to him. Like I said, the officer just bombarded him with questions. He used the breathalyzer on him 4 times. Then, when the breathalyzer wasn't giving the officer the results he wanted, he took a blood sample from him.

ForgeTheBlade

Admin 02.06.2013. 17:49

I will give a chance answer for what I am assuming is a theoretical situation. As to the question of "What rights does an arrested and jailed undocumented man have?", the question speaks for itself.

As the question states this "undocumented man" was "arrested and jailed". He has the same "rights" as any other person arrested and jailed.
Some of those rights include rights afforded by the Miranda rights,strangely an Arizona ruling. But as an arrested individual they can not be "punished" or treated as guilty while they await trial.
There is also a right to be housed in humane facilities and by the Eighth Amendment to be free from inhuman conditions. Inmates are entitled to medical and mental care or attention as needed to treat both short-term conditions and long-term illnesses. Then accordingly they have right to a speedy trail, not to testify or incriminate themselves.
Depending on how deep you want to go with details to this situation "rights" I assume become more involved with a hired or court appointed attorney or my preferred public pretender.


In reply to what the assumed theoretical situation I have to wonder why 6 police cars are waiting around the perimeter. To me the would be more a tactical style arrest, one that is planned in advance for a suspect that law enforcement has previous criminal knowledge of.
Otherwise I ask why are they waiting in amass unless this undocumented man was being followed by a (unseen?) cruiser radioing ahead for assistance in a stop. I do not believe that just pulling into a hotel parking lot and exiting your vehicle constitutes reason for swarming a vehicle with an intent of obtaining a DUI.
To me at this point anything that happened during and after the arrest is what a (good) lawyer would be arguing in front of a judge in trial. What puzzles me is would these answers be the same if this question were about Johnny Public Citizen?
Saying what I have said I could name many states jails and prisons were these "rights" are ignored but my opposing answer would not garnish support of any of the so far given answers.

Admin

Randy L 02.03.2007. 02:24

What would be a good stock trading strategy for using a Trailing Stop ? Want to trade stocks short-term (online) and need advice from successful traders. Thanks for your time and advice!

Randy L

Admin 02.03.2007. 02:24

Obviously you need to figure out where to place the stop initially before it starts trailing. There are a couple choices -
1. Select a price some stop loss % (2, 3, 4, 5% - whatever you're comfortable with) or
2. Base your initial stop on a support level.

Method 2 is what is normally used in Forex trading. In stocks I use mental stops as opposed to actually placing the order but I'm reviewing my charts a couple times a day so I know where my stop-loss is at and I have access to a computer all day. The concept is that if a stock starts to drop it will tend to halt its decline at a support level, at least temporarily. If support holds, price will bounce off of it and start rising again. If support breaks down, price will likely continue to fall. Price will probe the support and go below it temporarily then rise back to or above it while it is testing support so you want to have your initial stop at some tolerance below the support level.

Here's an example of how to set the initial stop -
Refer to the following chart:
http://stockcharts.com/h-sc/ui?s=NTO&p=D&yr=0&mn=10&dy=0&id=p52292255501&a=74443331&listNum=25

Once you decide on a stock, determine the support/resistance levels as shown by the horizontal red/green lines. Near todays action there is support/resistance at these prices:
3.92, 4.00 (natural), 4.19, 4.40, 4.61

Let's say you wanted to buy at 4.15 on Wednesday. There is natural support (even dollar amount) at 4.00 and 3.92.
1. Determine what your loss tolerance is - let's say 5%
2. Determine how much tolerance below the support level you want to be ~ 2%
3. Determine where 2% is below support - 4.00 minus (4.00 * 2%) = 3.92
4. 3.92 would be your stop.
5. Determine how much of a loss you would take if stopped out - about 5.5 %
6. Determine if 5.5% is within your loss limit. If so, you would place the stop at 3.92 and if not, you have to decide whether to move the stop closer to support (increases the risk of getting stopped out) or not make the trade.

Once prices starts moving up, you have the choice of changing the stop to a trailing stop or to calculate a new support minus 2% stop price and manually change the stop.

All this may sound like more work than you want to do but after you do it 5-6 times, you will start to recognize the stop prices in a glance.

Admin

Eli 27.02.2009. 10:19

What does it mean when an attorney wants to suppress a part of a crime? A friend got a DUI 3 years ago and he is taking it to trail. The attorney is going to fight that he repeated wanting not to do the roadside tests the cops gave and one officer says he said he did not ask to stop and just go inside his apt. The other officer says that he did ask to just go inside the apt. once, twice, possibly several times. To suppress from the time he got off the car to the time he got arrested. He was pulled over because the headlights had quit working.

Eli

Admin 27.02.2009. 10:19

Wants to and doing are two different sides of the fence
.
The judge will be the only one who can permit evidence to not be admitted into a court room
.
The lawyer only can petition the court to do so
.

Admin

Aaron 07.01.2011. 16:53

What can we do to stop the blame-failures-on-public-perceptions gap? Feminists often blame the failures of women on "public perceptions". For example, they have spent decades on campaigns to encourage women to enter into science and engineering disciplines, but women still trail men substantially and quantitative standardized tests. What can we do to encourage men to blame more of their problems on public perception so that they can be equal with women?

Aaron

Admin 07.01.2011. 16:53

I once had my soldiers beat a feminist for protesting about some feminist jargon.

Admin

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