When you enter them with your brokerage firm, the
may see your willingness to sell at a price below the current price and conveniently match your order up with some big client who is looking to buy at that price.
In other words, I don't want the market makers to see my stop-loss or trailing stop-loss orders.
So I like to use a service like
, which just launched its latest version with many new bells and whistles including a position-sizing calculator and interactive charts so you can "back-test" different percentage trailing stop losses and see how they'd performed on your favorite stock holdings.
You can set trailing stop-loss alerts that will send you an email when your shares have reached the level where you've decided ahead of time that you want to sell them in order to lock in gains or prevent unacceptable losses.
As it says on its Web site, and we've probably all experienced, many investors experience two kinds of challenges: "Holding onto a loser too long in the hope of it one day recovering, only throwing in the towel when the loss finally becomes intolerable," or, "Making nice gains, only to get nervous during the pullback and sell for a small profit -- or even a loss -- and then watching the stock take off to new heights without you."
The only way I know to keep those two bad things from happening is to utilize the disciplines involved with carefully setting either a trailing stop-loss strategy or a stop-limit that protects you on the downside. You can also use this system to get alerts when the stocks you want to buy have corrected down to levels where you want to begin nibbling.
I'd encourage you to watch the video at TradeStops and to visit its home page linked above. Familiarize yourself with all its features, benefits and tools that will help make you a more disciplined investor. It helps to be able to override our emotions (especially fear and greed) and to set some of our investment goals when we're not in the thick of battle and suddenly pressed to make a decision.
Speaking of Apple stock: If you would have used a 25% trailing stop-loss you'd probably still own your shares through this amazing move skyward in the price of AAPL shares, as the chart below illustrates. Trailing stop losses can help you "stay in the game" with your favorite stock positions, especially when they suddenly move higher than you could have anticipated.
They'll also help you from selling too soon.
At the time of publication the author had no position in any of the companies mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.