01 Nov The Value of Stop-Loss Orders
This is a real example of the value of stop-loss orders. When we bought Amgen for a family member at $150 we placed a 10% trailing stop-loss order. The share price moved up nicely to $175, causing the sop-loss level to move up to $157.50. Last Friday the 28th of October, Amgen reported decent results but warned about pricing problems:
That caused quite a slide in the price with exceptionally high volume of 17 million shares traded. Fortunately the stop-loss triggered at the opening on Friday morning and we sold Amgen at $151.35, virtually the top price of the day. Amgen went as low as $143 on Friday, nearly 6% lower than our exit price. The net result is that she made a small profit without having to watch her shares all the time. It would have been even better if Amgen triggered the stop-loss a day or two earlier, but that was just a bit higher than $157.50 level.
It is good advice to place stop-loss orders on all your positions to prevent big losses when prices fall suddenly. This means you can go on holiday without having to watch your portfolio all the time. You can place a trailing stop-loss order immediately when you enter a buy order on iTradeGlobal.