Don't Leave Stocks Unattended while on Vacation

From Ken Little

you are planning a summer vacation, don’t forget to arrange to take care of your stock positions along with the dog, the plants and your mail.
You don’t want to leave any of those unattended for any length of time.
Technology permits you to take stock monitoring with you virtually (pun intended) where ever you go. However, this is a vacation and you may not want to spend it watching the Dow.
Some protection What you need is some protection in place to prevent significant losses if your stocks melt down while you’re relaxing on a beach somewhere. You may also want to jump on a stock that you’ve had your eye on, but felt was currently over-priced.
You can solve both these problems with a couple of standing orders with your broker.
A stop loss order tells your broker that if the stock’s price slips to this level, you want to sell.

This prevents you from suffering a significant loss and is executed without any further action on your part.
You’ll want to set the stop loss price below the current trading range of the stock so normal price fluctuation doesn’t activate it. For some stocks, five percent below the current market price is just fine, while stocks that are more volatile may need a bigger cushion.
If you have a nice profit in a stock that is still rising, you probably want to use a variation of the stop loss called a trailing stop. Read my article on trailing stops for more information on this easy tool.
Long-Term Hold If you have a stock that you feel is a hold for the long term, you may be willing to let it slip farther.
If there is a stock you want to buy, but are looking for a better price you can leave a limit order with your broker. A limit order specifies the number of shares and price you are willing to pay for the stock.
If the stock hits that price or lower, your broker will execute the order.
Of course, there is a small danger with limit orders. What if the stock you had your eye on suddenly turns to dust because of some corporate scandal? Your limit order would be executed as the stock plunged into the toilet. It doesn’t happen that often, but it could, so be aware of the risk.
Conclusion You don’t have to leave your stocks unattended when you go on vacation. Use some of the available stock orders to help protect your portfolio and plenty of sun block to protect your skin and you’ll enjoy the vacation even more.

Article Resource : http://stocks.about.com/od/tradingbasics/a/Vac051005.htm

Under Standing Stop Loss : How Stop Loss Orders can Protect You

From Ken Little,

When the bottom falls out of your favorite stock’s price a stop loss order on file with your broker can help ease the pain.
A stop loss order instructs your broker to sell when the price hits a certain point. The purpose of the stop loss is obvious – you want to get out of the stock before it falls any farther.
A stop loss order works like this: You tell your broker you want a stop loss order at a certain price on the stock. When, and if, the stock hits that price, your stop loss order becomes a market order, which means your broker sells the stock at the best market price available immediately.
Setting a Stop Loss If the stock is trading at $30 per share and normally doesn’t fluctuate more than $1-$2, then a stop loss order at $26.50 might be reasonable.
A good example of how investors could use the stop loss order was when Merck, the pharmaceutical giant, pulled its blockbuster arthritis drug Vioxx off the market.

Studies linked usage of the popular drug to an increased likelihood of heart attacks and stroke.
As soon as Merck made the announcement, its stock began dropping like a rock because investors knew how much the company was counting on profits from the drug.
Wiped Out By the end of the day, the stock was down almost 27% or over $11 – wiping out billions in value of the company.
The stock opened around $45 the day of the announcement. If you had a stop loss order in for $40, it would have triggered very soon after the announcement.
When the market hit your $40 price, your stop loss order became a market order, meaning your broker sold the stock at the best current price. That may not have been $40.
A fast-moving market may go past your target before your broker can fill your order. The good news is you probably want out of a plunging stock at the best price you can get and will take what you can get.
You can also use stop loss orders to lock in profits, but
Important Points Here are some important points to remember:
Be careful where you set your stop loss points. If a stock normally fluctuates 3-5 points, you don’t want to set your stop loss too close to that range or it will sell the stock on a normal downswing.
Stop loss orders take the emotion out of a sell decision by setting a floor on the downside.
If you plan to be out of touch from the market, on vacation for instance, put stop loss orders in so you have some protection against an unexpected disaster.
Stop loss orders don’t guarantee against losses. When disaster strikes a stock, it may fall so fast the best you can hope for is to come out close to you price.
Conclusion Stop loss orders are great insurance policies that cost you nothing and can save a fortune. Unless you plan to hold a stock forever, you should consider using them to protect yourself.

Article Resource : http://stocks.about.com/od/tradingbasics/a/stoploss.htm

Stop Loss Order – Are They Right For You?

By Bob Crane

I have been trading stocks now for over ten years and have never used a stop-loss order. There are several opinions as to whether you should use a stop-loss order or not but it comes down to your personal preference and trading style. If you are the type of trader or stock investor that takes long positions it really doesn’t matter just as long as you have quality companies in your portfolio.

During my years trading stocks I have set-up several accounts where I only paper trade to try out new techniques. The dummy portfolios range from tech stocks to under three dollar stocks. I also have dummy portfolios set-up for the various sectors that include the ETF’s for those sectors along with stocks of the most prominent companies in the sector.

The dummy portfolios where I have lost the most “money” is the three dollar and under stocks. It seems that the smallest companies where you could really make some money if they took off provide you with an opportunity to lose the most also. The stocks may seem cheap but if you look deep into the fundamentals of the company you will see that they aren’t really cheap at all. They just appear cheap because the stock is only three dollars. For someone who wants to trade those cheap stocks a stop-loss order would probably benefit you because if the economy itself doesn’t cause the prices of the cheap stock to go down the company usually has a secondary offering to raise cash that drives the stock lower.

If you are trading large high-quality companies you could actually be worse off from using a stop-loss. Let’s say that you had a hundred shares of XYZ company that you paid thirty three dollars per share for and you place a stop loss order to exit the trade if the price drops to thirty two dollars. Ok, so you are two days into owning your one hundred shares of XYZ corporation at thirty three dollars and it has already gone up five percent so you are making money on it then out of no where comes a newsflash that a terrorist may have a bomb in a key government building and a bomb squad is on the way..etc. Once the news hits the airwaves the stock market takes a big tumble and your shares of XYZ company drop to thirty-one dollars for one second and your stop-loss order is executed. One hour later the news comes back on and says that the terrorist threat was a hoax it was only someone working on the elevators in the building that scared someone into calling 911.
Three hours after you were taken out of your trade the price of XYZ shares go to thirty four dollars per share and continues climbing due to good news that the company just announced about a new product it is bringing to the marketplace. In that example you were whipsawed out of your position and turned what would have been a winning trade into a loser. In those cases instead of using a stop loss it would have been better to buy more shares of XYZ company as they went on sale if only briefly.

If you have a really profitable position in a stock and you are concerned about the recent quarters earnings report you may be better off just selling your position, but the next best thing in that case would be a stop-loss order to preserve some of your profits should the earnings news come out bad.

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Is The Stock Market Right For You?

By Gabriel J. Adams

You might have heard of small individual stock investors becoming rich from a few wise investments. Perhaps you long to become part of a large trading group that profits from the latest round of buying and selling shares of a company they hope will prove a moneymaker.

While all of these tales sound like something that could add to your financial stability, you should know that thousands of people across the globe take a stab at the stock market and plenty retreat with disappointment. Becoming aware of what it takes to succeed in the stock market world may help make the decision easier on whether or not taking this chance is right for you.

Stay Consistent
Before entering the stock market, you should establish a set of rules to stick by. It is important to stay consistent when dealing with the stock market. Lack of discipline will eventually lead to lack of profits. Those who get into the habit of chasing every stock market tip usually don’t make much money. These tips come a dime-a-dozen, so it is impossible to follow every lead. Showing discipline and sticking to a plan is needed in this business.

Avoid the Risk
Some traders jump into the stock market full of adventure, while others are more frugal. Some people, who carelessly make their decisions, have lost a fortune with the stock market. Those who spend their energy trying to protect their capital base will enjoy a higher level of financial safety. It is also said that you should never risk more than 3% of your portfolio on any one trade.

Don’t Lose Yourself
The stock market has its ups and down. Some people make a large profit while others lose a lot of money. Individuals with an impulsive personality must show restraint or rethink whether or not they will be able to handle the temptation to take risks. Once again, staying disciplined is highly recommended and knowing when to cut your losses if the time arises.

Know When to Take Chances
Traders also need to know when to take advantage of a stock that is rising. Some individuals become scared and jump out of a deal for fear that the stock will soon drop. Knowing when to take chances means allowing yourself to reap the benefits a little longer before abandoning a rising stock. If the stock should fall, you can then opt out with a little loss, but with more gain in the long run.

Not every transaction or decision you make has to generate money in order for you to prosper in the stock market. As long as you do not go below a pre-determined limit for yourself, testing the waters shouldn’t turn into a nightmare. Learning the ins and outs of the market before committing money will allow you to make the best decisions for yourself.

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Article Source: http://EzineArticles.com/?expert=Gabriel_J._Adams