Wednesday, April 14, 2010

Time To Check Your Stop-Loss Trigger Points!

As this article from MarketWatch points out, optimism about the U.S. economy is on the rise.

That's a good thing, right?

Not if you're a contrarian investor. If look to be greedy when others are fearful and pull back when others are greedy, you may want to take note of this optimism. The stock market has been on a tear for the past year or so, and many analysts think it may have gone a little further than the fundamentals warrant.

I happen to agree with them, but popular sentiment usually overshoots the fundamentals and momentum often carries the market higher or lower than it should otherwise be.

The bottom line as I see it is that we may be heading into the "borrowed time" phase of the bull market, and things may correct soon.

Let's face it - the market will correct sometime in the near future. Is it today? Will it be tomorrow? or 6 months from now?

No one knows for sure, and I don't personally care.

I use stop loss orders to be sure I don't ride the market all the way down, and I'm re-evaluating my trigger points for those orders and nudging them up. That way, when the market does correct I'll keep a little more of my profits. :)

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