Falling through the double bottom. Using a Stop Loss.

One of the great debates in stock trading is the use of stop loss orders. Basically a stop loss order is an order to stop you lossing large amounts a money. How they are used is, if a stock drops a certain percent, you automatically sell and cut your losses. i.e. a stock dropped 5% below my buy price, so I automatically sell for a loss.

Stop losses are particularly handy when trading using charts. Double bottoms can be strong charting signals for picking a reversal, but as seen on VPG and PBG, when a double bottom does not hold, further substancial losses can be seen.

If I see a stock I hold looking to close below its double bottom support, I will usually sell on the close, and look to buy back a few days later at a lower price.

Many people swear by stop losses, whilst many other people just see it as a tool to continually sell stocks at a loss.

Here is a video explaining one view on where to place stops.