Why stops are important

Posted by Investing Freak on July 28, 2008

Recently i began using the stop loss rule because this apple stock i own is driving me insane.

I bought DDM at 61.70  and i figured out it’s volatility through Average true Range (ATR) was around $2.40      61.7-2.4= 59.3

I decided to give it a little more space so i set $59.

with 15 shares i held at 61.7 i spent $932.5 ($7 commission included)
i sold with a stop rule in effect at $59  so that is  $878 after commission is deducted.

I ended up losing $54.5 or about 5.8%. I’m fine with that as long as it keeps me out of trouble.

Disciplined Traders Use Stops and Never go against their own rules.

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