In the summer of 1960, a new book How 1 Made $2,000,000 in the Stock Market written by a profes­sional dancer, Nicholas Darvas, created quite a sen­sation. Actually it offered no new techniques for speculative success, but it stressed and popularized an old device—the stop loss order. A stop loss order is one placed by a buyer or seller with a broker which automatically authorizes him to buy or sell a certain number of shares when a stock reaches a specified price. It is used to protect a paper profit or limit a possible loss in a stock.

To illustrate, suppose you buy 100 shares of Rexall at 50. You believe the stock will advance; the infor­mation about the company, the general condition of the market, and the specific "chart" performance of Rexall all indicate a forward movement in the stock. But you can be wrong in your judgment, and the evi­dence of that would be visible if the stock sold "off' from 50. So, as a defense against a possible error in judgment, you enter a stop loss order to sell at 47. If, then, the stock sells down to 47, you are "out." You incur a 3-point loss but prevent a greater one you might suffer if the stock sold down to 40.

The same tactic is useful when you have a fat paper profit. Suppose Rexall, which you bought at 50, ad­vances steadily to 85. That looks pretty good to you, but still Rexall might go higher. So you enter a stop loss sell order at 82. If Rexall drops to that figure, you're "out." If Rexall keeps on going up, nothing happens.

The use of stop loss orders is, however, subject to the discretion of the governors of a stock exchange. Often the heavy placement of stop loss orders creates artificially wide price fluctuations in trading; and, in the interests of stability and a more orderly market, the New York Stock Exchange has on a number of occasions banned stop loss orders in certain issues. For periods during 1960, stop loss orders were for­bidden on Studebaker-Packard "when issued," Nafi

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