Ways differ. But take support where you find it. It might get scarce. Support for you may appear in a wig and pick bra–or not. Maybe a trailing stop is more your style. Either way, the market feels like a frisky Vegas right now. Crazy blinking lights mark the way forward.
Life’s weird. Now it’s pressurized. Turn down the sound and draw in on the images. Madness, true madness. Mechanized troops, giant missile shapes shrink-wrapped in green cladding. Theatrical military parades are not news, but this danger level is very real. And what about this market?
The market? Who cares about the market while we face Armageddon? We do. So should anyone invested therein. Nuclear instability counts as potential systemic risk. Systemic risk means everything is up for grabs. Job one is to relax. Bring down your stress in ways that work for you.
Best play. Do nothing. Panic kills. The open looks mixed, not panicked. This is particularly true for long term investors.
All this is true, yet yesterday rolled on offering only a 1.4%, and 1.3% declines in Europe. In Asia the Shanghai B was actually slightly up. World markets did not react in a dramatic way. Yet attention remains our watch word.
“The hardest job in the world.” Song of the Day; “Suffer Some” Jane’s Addiction.
Plan 2. If risk is too high, consider placing “trailing stops” on your positions. You can set “sell” orders at any set position relative to your stock price. Snug stops are 1% to 2%. 3% is not unusual.
Trailing stops are automated sell orders. You set the trigger, above or even above current share price. The latter is simply a set sell order. Orders that trail in sync behind the share price are trailing. Use trailing stops to limit risk, if you are unable to track market moves in real time.
All automated sell orders have draw backs. When markets get weird, so do shaky shareholders. Often this results in the observable violent swings in the indices. Such “volatility” often stokes fear, and then selling. That’s called “selling pressure.”
Automated orders will preserve and protect during violent or volatile markets. Set your stops and your positions will be “stopped out” if that level is reached. Simply set your sell price for each stock individually, as you like.
While stops provide down-side protection, they also can kick you out of good positions. Volatile price moves go both directions, often immediately. Jittery money often over reacts to news by selling, thus pushing stock prices down. Buyers jump on the lower price and drive it back up, often past where it started.
Close trailing stops are often triggered on the way down, only to have the price bolt right back up leaving you out. This is common extended hours trading action. By the time the regular session opens your stock is above where it closed the day before–sometimes big time above.
If a stop is trailing by 3%, and the share price drops below triggering the sell, then jumps immediately back up by 5% or more, the shares were sold at a 5% loss to current price. Not good. This is why we do not use trailing stops. They can sell a position out, on a stock that may not soon provide another entry point.
Best Plan.: Relax. Do nothing. Wait, watch, and think.
Plan 3. Relax. Do nothing now. Monitor market action. Gaining a saense of market sentiment can allow you more opportunity to pick your best course. if it’s too uncertain, look for an exit you can live with. After all, you will be the one living with it.
StockJaw will be sitting tight today, and watching. We’ll let you know.
Images sourced from Pixabay.