The stock continued climbing this week as you can see. The highest close was on Wednesday, which was $29.61. So, after hours Wednesday night I moved the stop up to $29.11 with a trigger of $29.16.

With our stop at $29.11, Thursday's trading went the opposite way, but kept us in the trade. However, Friday saw a downward movement on higher volume, our stop getting hit and taking us out. We sold at $29.11, which means our profit for the trade was $29.11 minus $28.30 ($0.81), or $810 seeing as we bought 1000 shares. Take $35 in and $35 out plus $15 for the automatic stop-loss ($85 costs), and our net profit is $810 - $85, which is $725.

With the trade finished, we can now look back at how we stuck to our plan and exited when our stop got hit. Quite often this is when people change their minds and say to themselves, "Oh, it's going back up, I'll stay in a bit longer" etc., even though the stop has been hit. This is the beauty of an automatic stop. You don't even have to be there, so you can't change your mind. Some people watch the market live during the day and don't use automatic stops, but place the sell order themselves when the price drops. This method requires more discipline as your mind will want to keep you in the trade. Unfortunately, this often results in profit erosion as the stock continues dropping further. Have a look at the picture below, which is current as of Monday 17th December. Looks like our stop was a good method to be using as it protected most of our profits. If we had a preset profit target of say, $1000, we would have reached it and exited the trade a couple of days ago at $29.30, but as we were using a trailing stop, we sacrificed a bit of profit for the option of staying in and riding a potentially longer trend. In the end, $725 is O.K.

I hope this has been educational for those that are new to technical trading. This trade was done in real time with no knowledge of the outcome. At no stage did I read a newspaper or get any outside assistance for this trade, yet was able to make a nice profit. MSMI will teach you how to as well.

UPDATE: This stock continued down and actually breached the trend-line. The trailing stop proved effective as a profit-protecting, loss-prevention tool.

Please contact me by email if you have any inquiries: rickardgreg@hotmail.com.