28Jul/08
Why stops are important
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.
Remember!
Disciplined Traders Use Stops and Never go against their own rules.