Enough with the stop losses. They don’t work for the average investor. They sound good on paper, but most investors don’t watch the market all day long. And that’s where part of the trouble begins. A stop loss puts a sell order at a set price for a stock. But here’s the problem. If you’re out golfing, there could be a flash crash stopping you out and not re-buying on the way back up a minute or two later. Had you been watching the market you would have realized it was a technical problem and not a crash. The other problem is when the market does have a major crash and there’s blood in the streets. Your sell order is only filled when it’s filled. And it will be at the price determined by the market. Imagine being stuck in line at Christmas or before a storm. Your desired price is simply the price at the time your sale is made—which may be a whole lot lower than you had anticipated.
