I posted the following on one of my favorite boards, on the topic of taking profits on multi-baggers or letting your money ride. This is true only from an investment perspective, when you've done significant research on your position. Speculators probably do something different. I'm not being catty; I don't understand the spec mindset.
Personally, I prefer to let my winners run, but when I keep a big gainer I also use a stop-loss order to bolster my selling discipline.
It's easy to overlook a "slow leak" in a position; I've been surprised by sales from a stop-loss order I'd placed and forgotten.
It's possible your order will trigger, and then the stock will reverse its losses. Stop-loss orders are useful when you've picked a sales price you'll be happy with, but are not concerned with selling at the absolute highest price you can get. You can also set the order to sell all or part of your position.
I'm doing exactly this with a big winner, Helmerich & Payne, HP. Bought at $7.89, it's now a 350%+ gain; the old saying "pigs get slaughtered" is echoing in my head. However, I still love the stock.
Instead of selling, I have a stop-loss order in place to sell PART of my shares if the stock drops to $31. That's a large enough gap that the order won't be triggered by ordinary market fluctuations. I'd be selling about a third of my position, which would recover my original investment, plus a little extra profit. Two-thirds of my HP position would remain invested; I'd sell that portion only if the reasons behind my original investment hypothesis changed.
This allows you both to preserve your profits in the face of irrational market pricing changes, and to capture the out-performance of stocks which have already proven themselves to be winners.
