How to Maximize your Profits with Trailing Stops

When a stock starts falling out of the sky, most of us freeze.

We become nervous, emotional traders.

We get caught up in the portfolio killer known as herd mentality.  Instead of calmly assessing, we lose our minds.

But that’s the wrong way to trade… and to be quite honest, that’s a beginner goof.

Any one can trade a stock.  That’s the easy part. 

The hard part is removing the emotion from the trade, remaining calm, and knowing exactly when to sell.  We’ve all made that “colossal” error that cost us money either because we weren’t paying attention, sold too late, or got caught in herd hysteria.

Over the last 20 years as a trader, I’ve seen fortunes made in a heartbeat.

I’ve also seen fortunes, homes lost in seconds on one wrong move.

But we have to remember that to trade successful, we must have a plan in place.

One of those plans must involve what’s known as the trailing stop loss – the very exit strategy that removes all emotion from the trade.  If your stop is hit, you’re out automatically.  There’s no second-guessing.  If your stock pushes higher, the trailing stop resets higher, too, never triggering until it plummets.

For example, let’s say that in September 2016, I risked $5,000 on Chevron (CVX) at $97 a share, betting that an OPEC production cut was likely. 

When the stock reached $111, I’m now up 14%.  Now I want to protect that gain, so I introduce a -5% trailing stop, which means that if the stock now pulls back more than 5% to $105.45, I’m automatically stopped out, no questions asked.

Now, if CVX continues to move higher, my stop is never triggered.

However, it does reset.  Let’s say the stock moves to $120.  My trailing stop of 5% would now stop me out of CVX at $114.

So why do we use a trailing stop? 

Such a stop keeps us from selling our stocks at the wrong time while in a solid uptrend, while preventing minute losses from wiping out your portfolio.


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Follow your Stops… No Exceptions

If you fail to follow that simple rule, the system breaks down.  We’re then back to trading on emotion.  But that can oftentimes lead to disaster.

I knew investors that failed to use trailing stop losses before:

  • Bear Stearns plummeted from a high of near $175 to nothing.
  • Lehman Brothers fell from $85 to nothing.
  • Countrywide Financial plummeted from $40 to $5
  • Or when during the financial crisis, the DIA ETF plummeted from $110 to $50

Imagine having $50,000 on a trade… and all of a sudden, it’s all gone.

I’ve seen that happen before.  It’s ugly. 

Trailing stop losses are another effective way to manage unnecessary risk.  If you don’t have the discipline to use it, you shouldn’t be trading.

There are plenty of ways to capitalize on opportunities, but one easy way to lose it all.


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and Receive a Funded Account up to 250,000 USD! Learn How Here