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How to make sure you ALWAYS sell a stock near its peak

by , 20 June 2014

My friend Ryan felt untouchable.

His penny stock, Accentuate Limited, soared 64% just one week after he bought it!
The thing is, he's human.

He got greedy.

Even though the share reached his 50% take profit level - He held the share to let the profits keep rolling in.

After keeping the share for a few months his returns plummeted to -28%. This happened less than a year ago... And his share is still in the gutter.

But after I told him about this one trick - he's always sold his shares near its peak!

Here's what you need to do to make sure you lock in profits before it's too late.

Use this one trick and you’ll never need to worry about your stock again!
 
There’s a special trick you can use to always sell a stock near its peak. 
 
And it’s something used by one of history’s greatest investors – Martin Zweig. This trick helped him bag a return of 15.9% on average every year for 15 years in the US market.
 
It’s called a ‘trailing stop-loss’.
 
To understand this, you need to know what a stop-loss is. 
 
Investors use stop-losses for one simple reason: If your stock doesn’t rise as you’d hoped, stop-losses limit your potential losses.
 
Basically, it’s an order placed with your broker, to sell a stock when it drops below a certain price level. Usually, this stop level is based on a percentage of your purchase price. 
 
So let’s say you buy a share for R100 and set your stop-loss at 20%. If the share drops below R80, your broker will immediately sell your shares. But if it doesn’t go below this level, nothing will happen.
 
But in a bull market, if you use a regular stop-loss, you’ll leave money on the table.
 
That’s why you need a trailing stop-loss.
 
You see, a regular stop-loss is based on the value of your purchase price. A trailing stop, however, automatically adjusts your stop-loss so that it continues to move up as the price of your stock rises.
 
For example, let’s say you buy a share for R100. You set your trailing stop-loss at 20%. When your share rises to R200, your stop-loss level would move up to R160 (20% of R200 = R40, and R200 – R40 = R160). 
 
This means you’ve now locked in gains of R60 per share – Even if your shares fall below R160. 
 
So when you use a trailing stop-loss, you’re taking some of your profits off the table - Money that you know is in the bag. Without it, you’re shares are in free-fall!
 
So at what level should you set your trailing stop-loss?
 
It really depends on how much risk you’re willing to take. 
 
If you’re a conservative investor, you should place your trailing stop-loss at 10%-15%. 
 
A moderate risk take would set the level to 15%-25%. 
 
And, if you’re an aggressive investor who has a longer time frame and doesn’t panic over short-term losses you should set your trailing stop-loss level at 25%-35%.
 
In the Stock of the Month newsletter I set the trailing-stop loss level to 25%. This method has allowed us to almost always bank winners. In fact, over a three and half year period, we’ve only made losses on two shares!
 
So after you’ve bought your stock, simply tell your broker your trailing stop-loss level and you’ll always sell the share near its peak!
 
Thrive in your possibilities,
 
Jonathan Bachrach
 


How to make sure you ALWAYS sell a stock near its peak
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