It was very clear on Friday last week that there is not much room for S&P 500 to go up any further. As we strongly preach the trailing stop price it is imperative for our clients to refer daily to the website and get the stop-price updates for open positions. You cannot overlook this daily discipline, which only takes 5 minutes, of tracking updated stop prices. As a result of stop updates last week you ended up with some profit in your account. That’s a good thing.
However, this run may continue again in a week so we will be ready. How much more upside is questionable and it could be a small amount only. Once you cash out with your stop price then you can step back objectively and enter into a new trade with no anxiety. That is the cool thing about stop price rules, especially trailing stops, so we can lock-in profits all along. If the run is real then it can be a very effective tool. Keep in mind that if there is a lot of volatility then it could be a different story and you could get stopped out prematurely with a small loss. However, it’s better to be safe than sorry.
If the present decline ends up being minimal then we could experience more sideways action than full-fledged decline from all out selling. A sideways chop over a few weeks could actually help markets get some base and then reload again to the upside. You know the old saying that bull markets “climb the wall of worry”, Let your stops do the heavy lifting.