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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75626  
Subject: Re: Trailing Stop % Date: 2/13/2014 12:00 PM
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To expand on jdc's comment, I occasionally use a trailing stop on a position where I have acheived my desired gain, but I don't necessarily want to get out.

I may not know where the top is, or when a sell signal occurs, but when I have the growth that satisfies my goals, I plug in a trailing stop.

I did this with AAPL last year. I rode it up past $600 and I felt comfortable with my gains but rather than sell it and try to find a better investment, I simply placed a trailing stop - and proceeded to ride it up through 700 before it finally sold at $695 when my stop triggered. Good thing too as emotionally, I would not have known when to pull the trigger otherwise and would like have watched go all the way down to 600 and beyond. I was able to buy back in at $425 and again at $450.

Was AAPL a long term investment? Perhaps. I would have certainly held onto it if it went to $1000 and beyond. I also would have been satisfied if market forces turned it into a short term investment (as it turned out).

If I am buying something stable like the S&P index or an individual stock like ITW, I don't tend to use a stop. If I am buying something more volitile, I will use them in only two cases 1) at first purchase to protect me from something catastrophic, or 2) once I have achieved all my desired gain but have no specific better investment alternative. During times of potential significant volatility, I might put a trailing stop on most positions - as I did in October during the debt ceiling mess. I even put them on my S&P positions.

I used one in January on TQQQ (3x the NASDAQ) once I had 20% gain and as the market staarted turn direction. It sold the very next day. Now, I could have simply sold and saved myself the 5% loss on the trail but I was both satisfied to make 15% in 3 months on it and I wanted to stay invested incase the market continued to grow.

I have since bought back in at a new lower price but I chalk that opportunity up to luck, and not any particular skill.
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