Friday, December 28, 2007

The Downside Of Stop On The Close Only

We were stopped out of our position in FINL today with a loss of just over 21%.

This is one of the downfalls of using a stop on the close only as from time to time the loss
you take may be larger than the protective stop that was set.

This type of action however is more the exception than the rule and it is why I still continue
to use the stop on the close technique. There are many more times that this technique has turned a losing position into a winner, but from time to time you will get stuck, as was the case with FINL.

This is simply one of the risks that you take when using this type of protective stop.

Obviously if this makes you uncomfortable then the best thing to do would be to set your stop a bit wider to compensate for intra-day fluctuation.


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