The market direction fall to 1930 this morning has investors worried and other investors are enjoying profits from the downturn. This is always the way with investing. Still though, even those who are earning profits on the way down, never know when the trend may chance and their profits evaporate. Recently I received an email from an investor, Charles, who wrote in wondering about a simply stop-loss method to help protect his positions in the event that the downturn ends around 1930 and stocks move back up. Personally I don’t think 1930 will mark the end of the present correction but as an inactive investor who has little time to be constantly monitoring his positions, Charles needed some help setting up a simple but effective strategy to try to earn profits through the downturn. Let’s start with his questions. (my adjustments are in brackets)
Question From Investor – Protecting Profits
“Teddi – On September 29 you titled your morning comments – “clearly lower” (Here is the link to those market direction morning comments) I have been trading for 15 years and joined many newsletters and spent thousands on online courses. I have never seen anyone call market direction and look at stocks the way you do. It is refreshing and comforting. I cannot be an active investor as I have a full-time career but your selling options strategies intrigued me and I have done very well with your alerts. I joined your site in 2012 which you now call USA members and recently joined the Canada site as well although I live in USA. I like to read as much as I can and so I joined both. After I read your Sept 29 comments I took the plunge and I bought 3000 shares of SDOW for $24.62. I emailed you, you may recall and and after emailing you, I bought the Nov 7 SPY $197 put at 3.47 and 3.35. I bought 25 contracts. Today the SDOW is at $25.70 and the SPY Put is $5.34. Thank you so much for what you do. I just renewed for a year both memberships. You should offer memberships for life as I would like that.
New Question – I am not able to watch all day long. I sometimes check my phone but most of the time I can only get away over the lunch hour. How long should I hold my trade for? Do you think stocks will fall a lot lower? I never know when to get out. I don’t want to give back my profit. What do you suggest. I need something simple to help me keep my profits. Thanks Teddi.”
The Focus of FullyInformed.com
First I want to thank Charles for his kind words and I can understand his concern on the profits. As to a lifetime membership, I am quite a bit older so that might not actually work out for most investors, if you understand what I mean. (Laughing right now). Investors who are members should be aiming to learn how to read the volatility of the market and understand how to invest based on their level of comfort. Never trade or invest in something you are not comfortable with. That is the focus of FullyInformed.com.
Comfort Zone
I just want to take this chance to mention that many get rich quick schemes and the like seem plausible on paper and when presented. I often watch “American Greed” on CNBC and more people should. I cannot urge people enough to not invest outside their level of comfort. We work hard for our money and the safety and security that it brings to us and our families. If I can only get one message out to people it would have to be watch American Greed and learn to only invest in what you truly understand and know. If returns are phenomenally high, be suspect and consider that you have spent years building up your nest egg. Don’t give it away. If you are young don’t believe you can afford to take losses now or risks now because you have a lifetime ahead of you. Instead consider that being young now means you have a lifetime to compound your returns. Losing capital when young means you are losing out on the building years of a portfolio. Capital compounds into larger amounts when you start young and do not take losses. Don’t give away the best years for building wealth. Always stay with a comfort zone that let’s you and your family sleep nights.
Understanding Exiting A Position
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