Saturday, December 09, 2006

A stitch in time saves nine

I like proverbs. They are short popular sayings embodying some familiar truth or useful thoughts. Much wisdom can be learned form proverbs.

“A stitch in time saves nine”
Your stop-loss, to be useful, must be refined.

It’s easy to say, “Cut your losses quickly and let your profits run”. It is imperative that you know exactly where to place your stop-loss. If you put it at the wrong place, your stop-loss can easily become your stop-gain.
Because every stock has a personality all it own, you cannot generalize. A stock which has a great velocity in its price is different from one that has a low velocity. Therefore, each calls for a different kind of action. If you want to trade, you must master the use of the stop-loss; otherwise you will get into all kinds of trouble. Never drive your car without brakes. Never trade without a stop-loss