Trapeze Artist - Swinging with the Stock Market

When we go to the circus we see a trapeze artist working on a high wire or swing either alone or with other athletes. They know what they are doing because of constant practice, but every once in a while there can be a mistake, even a small one that can cause one of them to fall. The result is death or serious injury when they hit the ground.

When you look below them you will see a net. Thank goodness. No one wants to see them get hurt. As expert as they are they take precautions. In almost every profession or athletic event there is some kind of safety net available and this is true in the stock market for all investors. There is never any reason for investments to fall to the point the investor is hurt. Is there a net that breaks that fall and keeps the investor from losing all or part of his money? Yes there is.

It is called a Stop Loss Order. Brokers don't like them and never recommend them because it means he must watch your account and the average broker has too many customers to do that. However, you can instruct him to place an Open Stop Loss Order that means it is automatically in every day protecting your shares from loss. If you are not allowed to place this kind of order you should move your account to another brokerage house. They obviously don't care about protecting your money.

Let me give you an example. Suppose that last year you bought Cisco Systems (CSCO) at $50 per share. The first question to ask yourself is how much am I going to risk in case this stock goes down instead of up? You put up $5,000 and bought 100 shares. How much are you willing to risk? $500. $1,000. More? Well, today it is about $15 so if you did not have a loss protection you would be out $3,500 and that is too much. The Stop Loss Order is your Safety Net! If you don't have one you can be seriously hurt. One of the basic rules is never to lose more than 10%. Look at what you own to see if you would have more money today if you had placed a Stop Loss Order just below the highest closing price for your stocks. I know you would be money ahead.

There are literally thousands of stocks that have lost 80% and 90% of their value. For those poor people (pun intended) who did not have a safety net they are badly hurt and some are just about dead. Sorry, folks, it did not have to happen.

I don't care what you own. Now you should immediately look at everything in your portfolio and decide where you need to place those stops. If you don't put a net in place you could be hurt.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

---

Boiler Room 7/17/00

On Friday or Saturday evening my wife gets a movie... Read More

Nest Eggs and Omelets

Do you have a nest egg? You know, a place... Read More

Price to Earnings Ratio - P/E

After finding the price of a particular stock, usually the... Read More

The Next Bull Market

We are already in it, but you can't see it.... Read More

Historical Briefing: Stocks, Finance and Money

The World Bank claims that some two billion of the... Read More

Planning Your Dive and Diving Your Plan ? Trading!

A colleague of mine just returned from a scuba diving... Read More

When Should I Sell?

People are always asking me when should I sell my... Read More

An Old Proverb for Investing

"If you don't know where you are going, any road... Read More

Robert Rodriguez Weathers the Stock Market

Robert Rodriguez likes to buy stocks at their lows. When... Read More

Acapulco - The Stock Market Dives

There is a famous cliff on the ocean in Acapulco... Read More

Long-Term Investment In Todays Market?

The stock market is very unstable at this time going... Read More

Why Stock Is More Risky Than Options!

You probably have been told that options are risky. Even... Read More

Cash Is A Position

I go to the Money Show every year to visit... Read More

Is Active Trading The Answer?

One of the main reasons many of us get into... Read More

Trade Stocks for Real

I read a comment by a forum member on another... Read More

365/7/24

What does it take to be a stock trader? It... Read More

Trading Tips No 6: The High Cost of Low Cost Stock Market Information

It has been said that low cost or even free... Read More

How To Beat The Mutual Fund Companies At Their Own Game

You'd have had to be living on a desert island... Read More

True Investment Road Maps

If you don't know where you are going any road... Read More

Small-Cap Stocks: The Beginning of the Journey

When an individual investor wants to roll up his sleeves... Read More

Race Horses and Mutual Funds

For years investors have been taught to look into the... Read More

Trapeze Artist - Swinging with the Stock Market

When we go to the circus we see a trapeze... Read More

Stocks: Understand What You Buy!

"There is nothing more frightful than ignorance in action!" Johann... Read More

The Top 10 Reasons to Invest in Mutual Funds

Everyone who follows the financial news has heard of mutual... Read More

What Are You Waiting For?

Do you own any mutual funds? In an IRA or... Read More

Investment Capital Gains

Have you bought any mutual funds this year or late... Read More

Starbucks Stock is Up

Starbucks earnings are up again and so is their stock... Read More

Protectionism

First let's see what protectionism is. According to Mr. Webster... Read More

One Way Street

Ever turn down a street, get half way and suddenly... Read More

I Love To Lose Money

Well, not really. What I mean is I don't mind... Read More

Adding Funds

Someday you may want to retire and continue to live... Read More

Defining a Long-Term Investment in the Stock Market

For some "long term" would mean holding a stock position... Read More

Does Japan Matter?

For the last 12 years we have seen the Japanese... Read More