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Over the past week, oil and gas stocks have been quite volatile. But that's not bad news – not by a long shot.
In fact, this is always the time when energy investors should be on the hunt for bargains.
And don't worry. None of this volatility indicates the markets are on the cusp of a significant dive, even though the doomsday forecasters are out in full force.
Of course, these guys always sing the same tune, preaching Armageddon on a regular basis. After all, if nothing else, the law of averages will allow them to be right at least once!
But that's not happening anytime soon. There are simply no major problems on the horizon at the moment, even though some select energy shares have dipped.
That leaves us with what to do after the recent hiccup in oil and gas stocks.
In this case, the best approach is rather straightforward…
Get Busy When Your Oil and Gas Stocks Go on Sale
It's called dollar-cost averaging, and it's a smart way to lower your cost basis when your shares "go on sale."
Now keep in mind this is not something you want to do with all of your holdings. Some stocks will take much longer to recover and should be sold. In fact, as a rule of thumb, I recommend you use trailing stops and stick to them.
A trailing stop is one that follows the high price of your shares from inception. As the share price climbs, the stop loss – set as a percentage – climbs right along with it. This allows investors to lock in their profits and insulates them against any deep losses. It works because it takes the emotion out of the trade.
However, when the losses occur within an acceptable range, it's smart to dollar-cost average.
Here's how to do it:
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.