The S&P 500 has had a heck of a July, breaking out to new all-time highs. While it’s fun to sit and watch your stock portfolio delivering gains on a daily basis, Eagle Bay Capital founder J.C. Parets believes every stock trader should know his or her exit points.
According to Parets, even the best investors don’t know what tomorrow will bring, and setting a rational sell point before you ever buy a stock is always a good idea.
“Remember, we’re not in the business of being right, we’re in the business of making money,” Parets wrote.
He said investors should determine their “uncle” point, the price at which they will sell if the trade goes against them. In addition, they should consider at what price they will take their profits if their trade goes exceptionally well.
Calling ‘Uncle’
“You ever hear the phrase ‘defense wins championships’? That doesn’t just apply to football or even baseball, but in the capital markets as well,” Parets added.
Determining an appropriate place to set stop loss orders on a position can be difficult. Typically, the larger the position size, the more downside risk and the tighter you want…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
