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Why a Stop-Loss Is Your Best Friend


Everyone could use a safety net during the holidays.

For some reason, the mainstream media issue tons of stock picks and recommendations, but no one seems to add an exit strategy. You'd think such a phenomenon would only occur in an alternative dimension where stocks could never go down.

Nope. It's simply a clear-cut case of negligence on the part of mainstream financial media. Let's use a real example to see how much damage can occur without an exit plan:

At the moment, gold has been white hot. The Gold ETF (GLD) has made a very nice move.

As we can see below, the Oil ETF (USO) made a very similar (almost exact) move not too long ago.

Although many factors support a longer-term rise in Gold, no one can predict the future. Therefore, in order to be a successful investor in Gold, you must plug an initial stop-loss at a predefined acceptable level of loss. Then, if the play moves in your favor, you must raise the stop-loss to protect your gains and take profits off the table along the way.

Many of us will be stepping away from the trading station for a much deserved vacation. Protect your positions so you don't return to your personal version of Tim Burton's Nightmare Before Christmas.

Happy holidays and a healthy, prosperous New Year to all the minyans!
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No positions in stocks mentioned.
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