Thursday, March 31, 2011

Avoid Financial Disasters With Trailing Stops

By Chuck LeBeau, Director of Analytics  (originally published Jan. 2009)

Think of all the retirement funds and college tuition money that has been needlessly lost in these few months.  It’s a very sad scenario for average investors who are not Wall Street tycoons.  However the saddest part is that the investors who lost all these billions and trillions of dollars could have avoided this disaster by simply using some logical form of trailing exit to protect their investments.

Buy and Hold is not only the riskiest possible strategy it doesn’t qualify to be called a strategy.  Buy and Hold is actually the absence of any intelligent exit strategy and is mostly adopted by default.   Buy and Hold is only recommended by unknowing pundits who are out of touch with the modern market place and are willing to advise their followers that taking unlimited risk and being in the market 100% of the time is a good idea.  Obviously that mistaken advice has proven to be very costly.

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