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THE MARKET WHISPERER 27 9

5. A window opens for the stop order. Enter the type of order (limit or
market) to be executed when the price rises to $30.01.

6. Enter the stop price, which here is $30.01.
7. If at step 5 you chose a limit order, enter the limit price, e.g. $30.03.
8. Authorize the action by clicking OK.
9. Check in the trade manager window under the Orders tab if the order

has been lodged.
The opposite is valid for a situation where you want to execute a short
in a stock if it drops beneath the support level.

• Trailing Stop Order - The trailing stop order is very attractive to new
traders, but is less interesting to veteran traders. The order links the stop
order position with the stock’s changing price. Let’s say that you bought a
stock for $30 and want to enter a stop order for a price drop of 30 cents.
Of course you can do this the regular way with a stop order for $29.70, but
you can also enter instead a trailing stop for 30 cents, or if you prefer (I
never do!), as a percentage, in this case 1%.

SMART The trailing stop order is problematic since it does not
MONEY take into consideration support and resistance levels,
reversals or any other technical behavior. Generally it is not
recommended.

With a trailing stop order, the stop price moves up with the stock. In
other words, the stop will always maintain the distance of 30 cents below
the stock’s peak price, no matter how much it goes up. In other words,
you can enter the trailing stop and go on vacation. This, by the way, is the
only time I would recommend using the trailing stop – when you are on
vacation. Its disadvantage is that it is based on nothing: not on areas of
support or resistance, and not on intraday or daily reversals. If you’re
going to be away from the computer for several hours, enter a stop order
at one single, lower price for a while, according to the stock’s behavior, and
suited to the right technical area. A trailing stop is usually a bad idea.