Reader Feedback

Recently, reader Vermcj had some interesting comments regarding sell stops and his experiences. In case you missed it, here’s what he said:

So, I stick with closing prices as the best way, for me, to determine when my sell stops has been hit, even though I don’t know of any computer program or brokerage firm+ that will calculate closing prices as daily sell stops.

And I believe your financial advisor or you, if you don’t have a financial advisor, have to look at your sell stops EVERY day. I believe if you, or if you don’t have a financial advisor like Ulli look at your sell stops every day, or if you do your own trading and don’t have enough time to evaluate your sell stops EVERY DAY and make changes in your sell stops, EVERY DAY, then you don’t have enough time to be managing your portfolio, because you aren’t giving the proper amount of time to properly manage the very basic aspects of it.

I believe that poor choices in stocks, ETFs, mutual funds, futures, and options are more forgiving than ignoring stop sells.

[My emphasis]

I agree. It’s important that you track your sell stops on a daily basis, especially if the market heads higher so that you can capture the new high price of your holdings. This new high price will form the basis for calculating the 7% trailing stop loss. On minor pullbacks, you can check price action, but there will be nothing else to do.

If you set up your tracking on a spreadsheet, this should take no more than a few minutes a day.

Look at the highlighted sentence above. I agree wholeheartedly that a poor selection of funds/ETFs is more forgiving than ignoring sell stops. The reason is obvious: A poorly selected fund may turn out to be a lagging performer, while not paying attention to sell stops can ruin years of investing.

That’s the lesson of 2008. Unfortunately, millions of investors had to learn this fact the hard way.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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