Stop Order Lessons

I’m a little frustrated this morning because I invested in a stock last month and it is currently up 23%, but I sold it yesterday for only an 18% gain before commission.

First I have to say and 18% gain is pretty dang good so I’m not too sad. And I learned something.

I learned about stop orders, which is where you say sell a stock if it goes below a specified amount. This is useful when you have a stock like I did that was going up and you want to make sure you don’t lose your gain if it suddenly drops. The problem is you don’t want to set your stop too close to the current price because stocks have a tendency to spike down and your order gets triggered.

Which is what happen to me. I owned NOOF and I bought it at 9.178 after commission in December. Its been doing really well and was over 11 on Friday. I had been trailing it with a stop order and upped the stop to 10.8. Well it spiked down and the order became a market order and sold for 10.86.

Now I’ve learned a valuable lesson. But I also have to decide if I want back into NOOF. It still seems on the upswing.

Commissions are an important factor for me. All of this is happening my IRA account and I don’t have much in there so a commission is $17.95 + $3 for a stop order. Since I’m dealing with 100 shares, that can be 1% of the cost. So when I buy I pay 1% and when I sell I pay 1%, so I have to have at least a 2% gain to not lose money.