Longtime TradeStops members are familiar with the impressive array of tools that are on the site and how to use most of them. Over the last year, we’ve added thousands of new members who might not be as familiar with the TradeStops tools.
Today, we’ll address a couple of questions that we answer on an almost daily basis. This will help prepare you for our upcoming webinar on Wednesday, July 25. We’re answering your questions during the presentation. Later in this article, we’ll have a link to sign up for the webinar and the email address so you can ask your questions.
What is the difference between a VQ Stop and an SSI Stop?
This is the question we get the most from our members. It’s not difficult to understand, but it’s easier to use an example.
Very simply, a VQ stop is a stop price that is based on the most recent close of a stock and then subtracting the amount of the Volatility Quotient (VQ).
A Stock State Indicator (SSI) stop is a stop price based on the most recent high of a stock and then subtracting the amount of the VQ from that high.
Here’s a good example. Cisco Systems (CSCO) had its most recent high occur on May 10, 2018, at $45.94. At the end of last week, CSCO closed just inside the SSI Yellow Zone at $41.78.
The VQ of CSCO is 15.2%.
What is the SSI Stop for CSCO? It’s based on the most recent high two months ago. The current SSI Stop is $39.06.
What is the VQ Stop for CSCO? It’s based on the most recent closing price. The current VQ Stop for CSCO is $35.42.
We show both of these stops on the TradeStops site in the Stock Analyzer tool.
What should I do if my stock is in the SSI Red Zone?
There’s no “one-size-fits-all” answer to this question. Each investor has their own situation. Here are a couple of options to consider.
An investor who has owned a stock for a long time and has a very low cost-basis in the stock would understandably want to continue to hold on to the stock. Selling it could cause him/her to have to pay a large amount of capital gains taxes.
Someone who bought Johnson & Johnson (JNJ) in 2009 when the stock was trading below $50 would be reluctant to sell, even though JNJ is currently trading in the SSI Red Zone.
That’s understandable given the amount of taxes that would come due.
But what if an investor did the research and thinks that JNJ is a fundamentally sound stock that should be in their portfolio?
Then we believe the best course of action would be to patiently wait until JNJ has triggered a new SSI Entry signal and is back in the SSI Green Zone.
As we’ve told you for the last couple of years the best time to buy a stock is right after it has triggered a new SSI Entry signal. Our updated SSI statistics bear this out. By following the SSI signals, the average gain per trade is 39%.
For new members, it can take a few months to get “in sync” with the TradeStops signals. That’s okay. We’re interested in the results over a long period of time — not just for a couple of weeks.
We want to help you achieve the TradeStops mantra: Make More and Risk Less.
Education and Research Specialist, TradeStops