eTrade’s Trailing Stop Market

I recently discovered an interesting feature of eTrade: “Trailing Stop Market”. You can find it under “Advanced” stock order tab. If the price hits a new high after you put the order, then the trailing stop re-adjusts your stop order price. You can set the stop price as a certain $ or % below your price (which will be updated if the stock keeps going up).

I think this is ideal for momentum investing. You can stay invested as long as the price is going up, while limiting your maximum loss (assuming there is not a large price discontinuity).

This can be combined with the idea of playing agriculture (POT or VT). I agree with Eddie that there is a risk of a bubble, but it may keep going up for a while before it burst. Waiting for a pull back does not work all the time, as it might be too late to get in! Trailing stop may be a better option.

The trick is to choose the right % to avoid selling on daily fluctuations while avoiding a large loss.