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 MarketTrak Question/Comment Message


Posted By: Roy   Date: Tue Apr 1, 2008

Title: stops

Message:
  One of the hardest things I find to do is placing stops. If you have stops and don't honor them you may as well not have them. If you place stops and do honor them you have to take every one,there's no second guessing before the fact. I know you recommend a 2% stop on the Dow below the recent high close and reentering the market on the close of the second day if the signal is still long. On 3/24 the Dow closed at 12548.64. 3/28 was the first day the Dow closed at or below 2% when it closed @ 12216.40. Today is the second day after the stop was hit and you would be buying on the close which was 12654.36. I was wondering if you took the recommended stop and bought again today.

Response:
  Roy, I have to agree with you on the use of stops. I don't set them too tight in fear that I will be stopped out and then miss a big rally. So I now use a 5% trailing stop. The market is too volatile for 2%. If I decide not to set stops and I am long, I will buy out-of-the-money put options as a hedge against a big decline.
I did at one time publish a stop set point, but I think the set point that you need to use will depend on your risk tolerance and other financial factors.

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