Top 3 Reasons Why You Should Use Stops

Top 3 Reasons Why You Should Use Stops 

Why do you need to use stop-loss for two reasons: 

1. Protect your money 

This is the money you have allocated to investments. Even experienced investors suffer losses. You need to have a strategy to maintain the most intact of your initial investment. If you do not have your transaction safety net, how would you get out a bad deal, contrary you do? 

2. To protect your profits 

You also need to have a strategy that can help you out of the deal, turn in your favor. This may seem strange, but it is important to protect your profits, especially since rising stocks suddenly callback, and reverse the trend. 

Capital protection is a top priority, to protect your capital growth is the second. 

Stop Order is the easiest and most effective way to limit your losing trades. This gives you a clear exit when you book a loss of signal level has to protect your money. Your trading and investment money, not lose it. Ways to make money in the market by controlling your losses, and can not eliminate them. You can not avoid the loss, but the loss of control and management, so that your winning industry dominates. 

The best way to control losses: 

Always use stop losses. 

And enter the stop, as long as you enter the trade. 

If you buy trade R10 000, your entire R10 000 is no longer the risk of complete loss. You use the stop-loss exit strategy will allow you to limit your losses, you choose an acceptable level. Stops are designed to protect your capital. 

1. What is an acceptable level? 

Price is always some degree of 'noise', due to random price movements. These fluctuations things, a person must live together, for each range of the movement of a stock is different. When using a stop loss, you need to avoid the noise stockâ € ™ range set your stop price, triggering a sell-off action. You want from a decline in the real price protection, abnormal upward and downward price movements. 

This is mainly with the stop, choose loss cut the price decision. If you stop too far below your purchase price, you will lose too much before the sell-off was triggered. If you stop too close to your bid, you will get kicked out of your trade prematurely, without justification. When you get into unnecessary transaction, transaction costs and taxes become expensive. 

For relatively stable stocks, experienced investors often use a percentage of the extent of losses. In this case, the biggest risk they are exposed to any trade, investment amount of x%. This percentage is whatever you want it to be, based on how comfortable you are lost each transaction. You can define your loss is limited to the ridge or%. If you are willing to lose in the trade is R1 000, you can set your stop limit sell automatically when you've lost R1 000. 

This great tool that can help you practice and develop good money management skills. It makes you think how much money you should risk on each trade. This is your trading strategy is an important part, we must always adhere to. A sound exit strategy needs to eliminate pressure to make tough trading decisions. It also lets you sell too early, missed let your profits run benefits. You have to learn to deal insist that any set of rules you adopt. You will be successful if you can get this discipline. It may seem simple, but it is an essential success