My current holding are in PFE, VRNT, QQQ and GM. Currently I do not use trailing stop loss orders but I was talking to a veteran trader yesterday at a conference. The trader said the average person could make a lot more money if they took all of their money and set 1% or 2% trailing stop losses on their orders. In other words say your average investor/trader has $20k in their brokerage. They wait for a few red days in a row and then put all $20k into one stock they believe is oversold and will run up in months to come. They buy the stock and then immediately put in a trailing top loss order of 2% so worst case scenario is they loose 2%. Stock runs up 5% in a week then drops 8% the week after? You are still making a profit because it sells after a 2% drop after the 5% recent peak so you walk with a 3% profit.
This seems like a hack and something everyone should be doing. It begs the question why doesn’t everyone do this? I know people out there who have a ton of money in stocks and have no type of orders out there – these same people have lost tons of money when stocks like Netflix, Carvana, etc have gone down >10% in a day.
Is this veteran trader full of it or is there some method to their madness?
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