finance articles businesses business management business marketing Technologies finance accounting Industrial Manufacturing starting a small business Investment health information

What is a good rule for setting stops?

The topic of this article is the answer to the following question: what is a good rule for setting stops?If you are an investor, no matter how many investments you have, a little or a lot, or how much money you have invested in your stocks, you need to know about stop-losses and how to set stops, or stop-losses.A stop-loss is one of the most important tools for an investor, and so you need to know exactly what a stop loss is and how you should set it.
There is no catch-all rule for setting stop losses.Where you set your stop loss depends on your personal portfolio, your investment strategy and approach, and how much risk you are comfortable taking with your stocks.However, there are some general guidelines that you can follow when you are deciding where to set your stop loss, and that's what we will cover in this article.
When you set a stop loss, you are essentially saying that when your stock falls a certain amount, that you specify, then you will automatically sell your stocks.Essentially, when a stock falls by a certain amount, then there really isn't any sort of value waiting around hoping for a recovery.Chances are that when stocks fall that far, they are not going to recover their value, and you'll just be losing money as you wait for the stocks to rise again anyway.Now, when you are deciding where you are going to set your stop loss, there are a few things that you need to take into consideration.If you set your stop loss level too small, then what is going to happen is that your portfolio will end up liquidating, and you will lose money on it.However, if you set your stop loss level that is too high, then you are going to end up with massively huge losses on your stocks.Probably the wisest place for you to set your stop loss is 10pc.But once you set your stop loss, then you have to stick to it the entire time or else your stop loss is not going to work.

This is how the stop loss works.Right when you buy a share, then you then set the price at which you you want to sell it if it happens to fall back.You can change the margin at which you want to sell it back, but the general rule for setting your stop loss, or your selling price, is at 20% below the amount at which you bought the stock.So if you end up purchasing a stock at 100p, then set your stop loss at 80p.Then when your stock falls to 80p, then you automatically sell it.Then you will only lose 20% on your stock.Even though it might hurt, you are at least limiting your losses to only 20%.
The most important rule when setting your stop loss is to never reduce your stop loss.That takes away the point of stop losses and setting them.If you are always changing your stop loss, then you are not automatically conrolling your losses.Basically, stop losses are an automatically way that you can discipline yourself and your losses.
A stop loss can help you reduce the risk of your stocks even though it does not reduce the gains that you might make.You aren't setting a level on the upper part of the stock, so the stock can go as high as it possibly can.You're just saying that you never want to lose more than 20% of the value of your stock.
Of course, there are times when your stop loss won't protect your from serious loss.If something horribly, horribly wrong happens with your stock, and suddenly the price plunges, then there is not time for your stop loss to go into effect.You will end up losing a lot of money on that stock.But, to be honest, if the stock is able to plunge like that, you don't want to be involved in it anyway.And if the market is good, then there isn't a lot to worry about.The other problem with stop losses is that a stock can fall, your stop loss automatically kicks in, and then the stock rebounds to even higher levels.You might end up angry, but that's just the way that the stock market plays out.There is no way that you can guarantee that your decisions will be the right ones, and there is no way to get rid of all of the risk in the stock market.But stop losses can help.

FREE: Get More Leads!
How To Get More LeadsSubscribe to our free newsletter and get our "How To Get More Leads" course free via email. Just enter your first name and email address below to subscribe.
First Name *
Email *

Get More Business Info
Sponsored Links
Recent Articles


Copyright 2003-2020 by - All Rights Reserved
Privacy Policy, Terms of Use