Stop Limit orders

When managing my long term savings inside a tax deferred account (IRA) is it prudent to use a "stop-limit’ strategy 20% below my purchase price of individual investments?




You forgot to fill out your rap sheet to see what kind of an investor / trader you are with risk and money management skills.

Why in the werld are you giving up 20% as a HODLer (Hang on for dear life). This is a trader’s market.

Go back to the drawing board.

At your leisure, peruse the following. I call it Simon Sez IV, a strategy I use as a successful Swing Trader. It is almost impossible to lose a freaking dyme. It only takes 10 minutes each day at around 1O am EST.

Stay the course and you guys will be millionaires eg…AAPL…

Something to ponder.

Quillnpenn - a poor church mouse scratching for a living as a Swing Trader for over 45 years.
------------ Vision - Multi-Millionaire…Goal - earn 1.3% - 2.5% compounded Daily

Market volatility often causes stop loss orders to trigger soon after they are in place. Taking 20% loss from current market makes it expensive.

If you have a high flyer stock with lots of accumulated paper profits a trailing stop loss can be useful if you think the price might crash. But other strategies work better. Better to sell part of the shares at market. This works especially well if you receive enough to cover your costs. Then you are playing with other peoples money. If it continues skyward you still benefit. If it crashes, you can probably still sell at a profit.


Hi, Gerry.

To borrow from The Mandalorian, stop losses are not the way. Any money you need in the next 3 years (5-8 years if living in retirement) should not be invested, period. For anything invested for the long term (3-5 years or longer), TMF encourages Fools to let their winners run.

Stop Loss trade orders are an enemy to long term (3-5 years or longer) buy-and-hold investing, a cornerstone to Foolish investing philosophy. Not surprisingly, TMF does not endorse their use. You don’t want to be pulled out of an investment where the company’s market price is growing (let your winners run), losing out on continued potential future growth.

You also don’t want to be pulled out of an investment where the company’s market price has fallen precipitously, locking in paper losses and losing out on any chance of recovery or additional investing in the company, especially if the drop is tied to a market swing and not any operational performance issues by the company.

Some may argue that they can time the market by getting out of a position that is falling then buy it again at the bottom. Except that you cannot reliably predict where that bottom is, and investors are more likely to miss that bottom out of caution. And that’s really the issue - stop losses are turning investing control over to the computers out of fear, and Fools try to keep emotion out of their investment decisions.

If an investment grows so much that it becomes so big a percentage of my portfolio that it presents a risk to be mitigated, then I might pro-actively trim that position, but I do not want to reactively sell out of it. And if a position has fallen through no fault of its own or for reasons that are not unrecoverable and which do not change my conviction in the long term (3-5 years or longer) growth potential of the company, then I do not want to reactively bail out take the time to research and make an informed decision.

Stop losses are not proactive informed decisions, they are reactive, emotional decisions, and that is why I will never ever use them.

Who wants to be in control of his investment at all times, even if he makes poor decisions in hindsight, because of all the right decisions he could also make…

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