Figuring out when to sell stock is the most difficult thing for a buy-and-hold investor, but a new service aims to provide some guidance on that front.

It's so much easier to think about buying stocks than selling them, because buying requires only a basic optimism that future growth will create wealth. Who wants to think about selling -- a decision that is likely far down the road?

Traders, on the other hand, are always thinking about when "enough is enough." They're willing to lock in a profit without remorse, even if the stock goes higher; they're willing to take a loss quickly, without "hoping" that the stock will rebound.

Successful traders have a unique characteristic that allows them to conquer emotions such as hope and dismay, greed and fear: self-discipline. It's the defining force that winnows out the successful traders from the losers. And it's in short supply among investors, who tend to panic at market extremes.

But there might be some help for mom-and-pop investors who want to employ the same type of market discipline as the professionals.

Stop-Loss Advice

A new service called > SmartStops.net has been created to give ordinary investors a dose of automatic self-discipline, advising them in advance when to sell a stock or exchange-traded fund that they own. It's done through a tool few investors use -- the "stop-loss" order.

A "stop-loss" order is a sell order, placed on your broker's books, telling them to sell "at the market" when the stock falls to a specific price. It's designed to protect profits from evaporating when a stock declines. And because it can be set for one day, or an "open" order -- sitting and waiting in case the stock falls to a certain level -- you don't have to be watching prices all the time. Almost every broker will accept a stop-loss order on a stock you own.

But what sell price should you specify? Is it just a matter of percentages -- so that if a stock declines, perhaps 10%, from its current price you should sell? Does it depend on past levels where chartists find "support" in past performance? Is it a matter of volatility, in both the stock and the market? And, if so, do these factors change on a daily basis?

Exit Strategy

SmartStop.net CEO Brent Collins and Chuck LeBeau, the company's director of analytics, believe the formula includes all of those ingredients, and many more. They've created a daily warning service telling traders and investors where to set their "stop-loss" orders for the following day.

LeBeau, a long time market technician, says their secret algorithm starts with the assumption that market has three directions -- up, down and sideways -- so the formula changes depending on the trend. But he says it's not just conventional market "charting" that sets the recommended stop-loss points.

"It's normal for stocks to change directions, but if they go down an abnormal amount in a day or two -- based on that stock's history which defines its 'normal' price action -- it's a statistical indicator that the stock is likely to go down further."

Avoiding Losses

SmartStocks.net monitors nearly 5,000 listed stocks and ETFs that trade at more than $5 per share and average at least 40,000 shares in daily trading volume. After the close, it sends subscribers an email, giving both short-term (if the selling time horizon less than six months) and longer-term stop points for the securities registered in their portfolio, so they can place their orders. Then subscribers get an email alert when the stop-points are reached, so if they haven't already placed an open stop-loss order they can call their brokers to sell.

In fact, the company has recently partnered with TD Ameritrade ( AMTD - Get Report) -- and is close to signing other major brokerage firms -- so subscribers can have their stop-loss orders entered automatically, instead of having to call their brokers.

Free Trial

If you set up a portfolio at SmartStops.net, the first three stocks you list are free. That is, you'll get the daily email and alert email for free when you create your portfolio. If you want to add 10 stocks, the cost is $9.95 per month. Larger portfolios cost more. Obviously, they're betting that users will see the value in their service.

And what if they are successful, too successful? Could all those stop-loss orders become a trigger point for aggressive traders who want to cause further market declines? It's a practice known as "gunning for the stops."

LeBeau responds: "I don't see where our impact is any different than a major brokerage firm making a sell recommendation."

He adds: "We believe that individual investors deserve to have timely sell advice -- and they aren't getting that from Wall Street."

Now, that's The Savage Truth.

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Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage's personal finance column in the Chicago Sun-Times is nationally syndicated. She was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. Savage currently serves as a director of the Chicago Mercantile Exchange Corp.