Monday, August 3, 2009

Recent Stock Market Highs; A Reminder To Watch Your Stops.

Depending on how you measure the performance of the stock market, it has risen roughly 30-35% from its March 2009 lows. Maybe this is the beginning of a new bull market, or maybe it's just a sucker's rally. How can you be sure which it is?

[caption id="attachment_121" align="alignnone" width="300" caption="The DOW JONES INDUSTRIAL AVERAGE has broken out since its March low. Can it last? "]The DOW JONES INDUSTRIAL AVERAGE has broken out since its March low. Can it last? [/caption]

Well, the beauty of it is that you don't need to know or care, if you're using Stops.

The trick with Stop Loss orders is to set them at the right levels. Still, determining what price you'd be willing to sell a holding for is a lot easier (and preferable) to trying to divine what is likely to happen in the stock market or to a specific stock in the near future.

So, take these recent highs a an opportunity to lock in some profit, by nudging your stop loss order trigger price up. That way, if the market discovers that the housing market or auto sales tank after the government bailouts and stimulus programs end, driving the market down a couple hundred points again - you'll be covered.

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