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10: The Essential Rules for Beating the Market by Louis Navellier, Michael Turner

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Chapter 4. The Stop Loss Rule

"The best stress reliever is a smart stop loss order!"

Equation 4.1. 

The Stop Loss Rule

So far you've learned the principles of Demand Fundamentals, the use of the price-to-earnings (PE) ratio to avoid buying expensive stocks, and the basis of technical analysis for picking the right time to open a new trade. In Rule 4, you will learn the right time to exit a position. This rule could be called the "Intelligent Stop Loss®" rule.

I believe this is the single most important concept of my approach to the market. There should be a huge star beside Rule 4! I have been "saved" from many whipsaw sessions in the market by using this strategy.

The objective of this rule is to hold onto a stock as long as it is making you money. "Making you money" is the important phrase here. It means you want to hold onto a stock as long as the stock's market price is trending or moving in the direction that provides an increasing level of unrealized gain.

Unrealized gain is the profit you ...

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