Stock Trading

Reason Number 2345 Why You Should Always Take Your Stops

It’s not always fun to get stopped out of a trade but the alternative might be a lot worse.

Sometimes taking stops sucks.  I know.  Maybe you’ve just had a few losers in a row and you don’t want to take another one.  Maybe you loaded up too big on this last trade and you’re really hoping it will turn around.  Maybe you just don’t like closing out losing trades.

Either way — let’s be real — sometimes closing out a trade at a stop sucks.

Sure, you’d like to take all of them — just like you’d like to work out every day.  But sometimes life just get’s in the way.

But here’s the thing.  If you don’t take your stops, when you’re supposed to take your stops, one of these days, the market is going to kick your ass.

Big time!

Take this week’s watchlist for instance.  Specifically $ANTH.

Here’s how it looked yesterday:

For a little while there the breakout seemed to be working.  We had a couple up days and the trade overall reached a max gain of about 8 or 9%. Then yesterday hit.

We had a super fast move down to our stop — and we were out.

Yes, it sucks having that gain swallowed up, and closing for a loss (which gave me an idea about moving stops) — but look at what happened this morning.

Ouch.

A -68% hair cut.  Heck, that’s not a hair cut, that’s a HEAD cut.

Yes, we have capital distributed over 5 positions so the loss would have been more like -13%, but still, it’s no fun to go through something like that.

Granted, some mornings you will wake up to find out this has happened to a position of yours BEFORE you hit your stop, and there’s nothing you can do about it, but this wasn’t one of those times as the trade should have been closed yesterday.

And this is yet ANOTHER reason I don’t like to trade when the market is below the 50 day MA.  All sorts of crazy things can happen to low priced stocks.

Geez.

-68%.

That’s enough to wake you up in the morning.

Good luck out there!

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