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Handling Stop-Loss “Slippage”

January 14, 2014

At the time you purchase a stock, the price at which you expect to sell at a loss should be written down and executed immediately upon the stock trading at that price.  It is at this critical point that you execute the trade as quickly as you possibly can.


Sooner or later however, one of your stocks will dive under your sell price before you can react; this is called “slippage”. My advice: get out immediately!  Take whatever the next bid price is.  Such a hard-falling stock is sending a warning.

One money manager I know badly mishandled this type of scenario. A stock dropped quickly on news and shot well below her pre-determined sell price; she was quickly down 15% on the position. She called me and asked my opinion. Of course, I told her I would have already sold if the stock had triggered my stop-loss. She instructed her portfolio manager to wait for the stock to come back and then to sell when they were down 5%. The stock never came back. In fact, it fell further and they ended up taking a 65% thrashing before they finally threw in the towel.

Does this sound familiar?

Sure, there are going to be many times when you sell a stock that’s down and it comes right back up. SO WHAT! Stop-loss protection is about protecting yourself from a major setback, or worse devastation; it’s an insurance policy. It has nothing to do with being right all the time or about getting the high or low price.

Success in the stock market has nothing to do with hope or luck. Winning stock traders have rules and a well thought out plan. Conversely, losers lack rules; and if they have rules, they don’t stick to them for very long; they deviate.

Remember, your first loss is your best loss


Mark Minervini



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