Managing Risk and Protecting Profits

Focus: STRATEGIES

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.