Trailing Stop Loss Orders are a great way to manage your stock investments. Do they always work? Not always. They don’t mix well with volatile stocks. Why? Volatile stocks can swing widely – from euphoric highs to catastrophic lows. And you don’t want to be caught in the low pattern. It is tough, even for seasoned investors, to know the precise timing that would be the correct solve in a volatile stock equation.
Higher Risks
If you have enough financial stability that you can accept the potential for the higher risks that come from trading with volatile stocks, then perhaps this part of the game is for you. If you have a low tolerance for high risk, you probably want to bypass volatile stocks and play with “safer” stocks.
Breached Levels
If you try to place a Trailing Stop Loss Order on a volatile stock, you will likely discover that it is very difficult to pick a time or day of the week to place your stop loss order on the stock. It’s too inconsistent because levels can be breached for seemingly no reason, and then rally, and then fall again, and then rally, etc. Many times, there truly doesn’t seem to be a “reason” that anyone can really put their finger on as to why their patterns change as they do. If you have a penchant for risk, then perhaps you can enjoy placing Trailing Stop Loss Orders on volatile stocks, but if not, it might be best to stay away from them.
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