A while back I set a bunch of stops. These stop-limit orders were set to protect some gains in my portfolio. When I am out of the office, sometimes I am not able to follow the market and trade. So when I have gains, I like to protect those gains with a stop-limit order. I put a floor under the stock price with the order. An “insurance floor”. There are lots of things that can go wrong with this type of stop-limit order. Just read all the disclaimers and warnings about it and you will see. As with all stock trades you have to understand the risks and the rewards and trade accordingly. So I decided that this time it was worth the risk to me and I put in a bunch of stop-limits to protect gains.

Over time I started getting emails stating that my orders had executed. So I booked my gains automatically and didn’t think much of it. I figured I was back to all cash.

Last Friday I saw that I had one stock left in this trading portfolio (along with my two worthless F Call options). So I decided to put a stop-loss under my position in HERO. When I went to place the order it would not go through. I still had an order in place from before! I had totally forgotten that I wanted to protect gains at 20% and now that the stock was up over 40% it was time to move the floor up higher to keep more of the gains. This time the floor worked well for me. It was there to protect my price if the stock went down but it also had no affect when the stock went up.

I just got lucky when I forgot about this position and the only thing that saved the extra gains was the periodic checkup…

So today I moved the “insurance floor” up again and now I have a stop-limit order in at a 50% gain. So in an orderly market I am likely to get stopped out and automatically sell at that level.

If I think I am getting close to a market top or I want to go ahead and book the gains, I will change my strategy to a trailing stop-loss order, that would be in order to “ratchet up” my sale price. I will not do that yet. The stock pulled back today and I am guessing it will probably go up a bit. So I will let it ride now, using my set “floor” price for now and later when I figure it is getting close to a top, I may try to milk out that little extra upside using a trailing stop order to “ratchet up” the price and try to get a few extra percent.

For now I have just this one stock, so I will play with it to see if I can get lucky again and make a few more percent…

But wait!

I just looked at the account to see what percentage of cash I had, so I could mention it to you here and I see that my stop-loss order has executed already. So I got stopped out and protected my 50% gain. From here maybe it will go back up and I will have missed out on more gain but who cares!?! These days any time I can lock in 50% gains, I am happy…

Now I have some worthless call options and a bunch of cash that I have to put to work in the market. Better start planning now and easing back in to the market when the time is right…