Is this a sound strategy to limit loss, and/or am I doing it right?
So after learning more recently about Trailing Stop Loss /Stop Loss orders, I have added said sell orders to most of my holdings ranging from 5-10%. I have based the percentage on each after looking at past performance of each stock/etf. My strategy is to place the trail percentage at a place that it wont sell on the normal volatility of the stock/etf, but will in the event of a major correction/crash and allow me to reinvest on the dip or allow me to move my money without taking the full brunt of the drop.
Now if the entire market crashed tommorrow all or most of my orders would initiate a sell. Of course this means I would lose far less of my portfolio, and would have far more to reinvest to reap the rewards of the recovery, instead of waiting forever to simply break even again.
The following examples are over blown and perfect world senarios, but should get across what I am trying to accomplish.
Example 1 (no stop loss orders) I have $10k in a stock and it drops 50% to $5k, it takes a year to gain 100% back to my orginial $10k, I still have not made money in a year= sad.
Example 2 (10% trailing stop loss): I have $10k in a stock and it drops 50%, but my trailing stop loss sell order initates at 10% and now i'm at $9k. I reinvest my money at the dip and 1 year later that stock recovers back to the orginal price, increasing 100% and now I'm sitting $18k= happy.
Opinions?
Submitted August 19, 2017 at 11:49PM by Ilikechacotacos http://ift.tt/2igRS0p
