At the American Association of Individual Investors (AAII) conference this past weekend, TradeSmith spoke in front of hundreds of individual investors. One of the TradeStops ongoing themes is how investors can learn to “un-limit” their gains. This is how it’s accomplished.
Novice investors tend to hold onto their losers too long and get out of their winners too quickly. They hold onto their losers because they don’t want to take a loss and many times their stock continues to move lower which causes them more pain.
With their winners, they are afraid their gains will go away, so they decide to sell too early, leaving huge moves to the upside on the table.
TradeStops helps you to maximize your gains by allowing you to know the best time to exit a stock as it’s moving lower.
The TradeStops Stock State Indicators are a simple green/yellow/red light system that shows you the health of your stocks.
It’s easy to look back and see what a great run the stock has had. But, be honest, if you hadn’t been using TradeStops, would you have been tempted to get out of the stock when it dropped close to 20% from $118 to $95 in just a couple months’ time?
Now, here’s the same chart, but with the TradeStops tools overlaid on top.
Sure, you might have been getting a bit nervous, but you would have known that NVDA was still within its range of normal volatility… and you would have held on to see the stock more than double in the following 6 months.
PEP has been in the SSI Yellow Zone eight times since then, but has never stopped out. Investors who have held this long have seen the stock rise to its current price of $110.22.
Nobody knows when a stock will hit its stop, but don’t be afraid to let it climb as high and for as long as it wants to go. Un-limiting your gains is key to being a successful investor over the long run.
Education Director, TradeStops