Cheddarblog

The Swiss_Mouse has several non-retirement and retirement investment accounts. This is not bragging like other bloggers (”OH I make a million every morning while I’m in my pajamas, losers!”). No, not at all. Just a fact. Mrs. Swiss_Mouse has retirement accounts at Schwab. Swiss_Mouse has accounts at Fidelity.

Swiss_Mouse and Mrs. Swiss_Mouse also have one joint account at TDAmeritrade. The Swiss_Mouse tells you this because TDAmeritrade has one feature that the Swiss_Mouse REALLY likes. He has not found a way to do this with any other account that he has.

TDAmeritrade allows you to set trading triggers and “Trailing Stops”. Trailing Stops are a wonderful feature of an account. ESPECIALLY in these volatile times! With Trailing Stops, you can set a specific SELL STOP on your stock or mutual fund, as a dollar amount or percentage. Your stock or mutual fund will automatically sell if that price point is hit. HOWEVER, what makes Trailing Stops so unique is that their selling price MOVES UP if your investment moves up!!! In other words if your investment keeps moving in a positive fashion, the point of where you would sell it moves as well. This is very handy to protect your profits!!!!

Perhaps an example might help.

Let’s say you buy a stock for $20. You set a trailing stop for 20%. So initially if the stock value decreased, it would sell automatically if the stock went down to $16 (20% of $20).

BUT, let’s say it increases. The stock goes from $20 to $25. Your “trailing sell stop” would move up as well. Your stock would NOW not automatically sell until the stock dropped to $20 (20% of $25). If you stock goes to $30, it’s stop point becomes 20% of $30 =$6 or $24.

You can see how Powerful this is for protecting appreciating assets.

Two final notes.

1. The only problem the Swiss_Mouse has had with this is that if a dividend is paid, apparently the Trailing Stop will cancel.
2. During the most recent sell off, the Swiss_Mouse had all 3 of his positions at TDAmeritrade activate their Trailing Stops. So the Swiss_Mouse now only has cheddar as cash in that account. But the Swiss_Mouse wishes his other accounts had such protection. He had to relie on plain sell stops there and did lose some profits.