by Alexander Green, Advisory Panelist

This month, we received word that the independent Hulbert Financial Digest just ranked our investment letter – The Oxford Club Communiqué – among the five top-performing letters in the nation over the past 10 years.

Part of our success has come from knowing what to buy. Another major factor is knowing when to sell.

And that, quite frankly, is the result of keeping our trailing stop discipline.

Whenever a recommended stock closes 25% below its closing high – or our original recommended price – we sell, no questions asked…

Why do we do this? Number one, a stock trader needs to have a sell discipline or he’s simply flying by the seat of his pants. Anyone can plunk for a few shares. But getting out at the right time is the true art of investing.

Your timing will never be perfect, of course. No investment system devised will ever beat the uncanny success of hindsight.

But the key is to always cut your losses and let your profits run. Easier said than done, however…

Using Trailing Stops to Overcome Emotion and Second-Guessing

Emotions like fear and greed (and hope) often get in the way. Even professional investors and money managers are prone to rationalizing.

But using a trailing stop enforces a discipline that takes the emotion – and the second-guessing – out of the investment process. Prices reflect the facts about a company better than individual opinions. So we don’t argue with the market.

However, some investors tell me they are just too busy to keep up with the trailing stops on their stocks. This makes no sense. It’s tantamount to a driver telling you he doesn’t have time to keep his eyes on the road.

View original at: Investment Advice and Investment Research with a Contrarian Point of View

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