Thursday, January 13, 2011

Trailing Stop Loss Order on ECOtality, Inc. (ECTY)

ECOtality has Great Potential Return on Investment

Two words: Electric Cars.  The world is already starting to make the transformation from gasoline powered cars to electric cars.  It is only a matter of time before we go completely electric.  Like cars that require gasoline, electric cars also need to be re-charged.  ECOtality is a leader in the "re-charge" industry and has many advantages including a partnership with Nissan and a proven product.  Nissan is a leading electric car producer, and there are already ECOtality charge stations in places like California and Asia.

For an up-close look at the ECOtality charge stations, check out the video below.



What is a Trailing Stop-Loss Order?

Think low risk and high reward.  If I set a stop loss at 15%, this means that the maximum that I can lose on my investment is 15%.  However, the maximum that I could earn on my investment is limitless.  For example if I invested $100 into company X with a stop loss order of 15%, the maximum I could lose is $15.  If the share price increases to $200 per share, I would make $100 profit.

Now that we know what a stop-loss order is, let's examine a "trailing" stop-loss order.  From the example above, my investment into company X would only sell if the share price dropped to $85 per share (15% drop).  With a trailing stop-loss order this would not be the case.  A trailing stop-loss order adjusts with an increase in share price.  For example, if the share price of company X increases to $200 per share, the new stop-loss price would be $170.  I feel that a trailing stop-loss order is more advantageous because it allows investors to ensure profit if the share price of a company they invest in initially surges.

I want to thank my good friend J Ludlow for bring this intriguing business to my attention.  He is in Environmental Studies at the University of Michigan and provides valuable insight.

Michael R Caligiuri owns shares of ECTY with a 15% trailing stop-loss order

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