The New Sell and Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines, Expanded Second Edition

Question 65—Moving Stops

Which of the following statements about moving stops is incorrect?

1. You may move stops only in the direction of the trade but never against it.

2. When you switch to a trailing stop after the prices reach their target you increase your risk.

3. When prices hang just above your stop, it makes sense to lower it to reduce the risk of a whipsaw.

4. When prices move in your favor, it makes sense to raise your stop to protect a part of your paper profit.