Managing Risk and Protecting Profits


Whether in competitive sports or piano playing, it pays to practice, practice, practice, which is also true in the art of stop placement. Here, technician Tom Aspray reviews a few trades from years past to help improve your current stop management skills today.

In a previous trading lesson, Mastering the Basics of Stop Placement, I shared some examples of how I place initial stops and how they are adjusted as the trade progresses. Using past recommendations as examples, I hoped that the reader would gain some insight so that they could improve their stop management as well as learn how to better protect their profits.

From the response I received, it appears that I was successful and the process also allowed me the opportunity to dissect many of my past trades, which is always a good learning experience. Through additional examples from years prior, I would also like to offer some suggestions on what might have been done differently.

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2012 was a good year for the healthcare stocks as the Select Sector SPDR Health Care (XLV) was up 15% by the end of November of that year, while some of its industry groups like biotechnology did much better.