Stop loss take profit strategy this strategy is an important strategy for stock trading. At first, we have to know about stop loss orders. The function of stop-loss orders is just like insurance. If the business goes loss for any reason, then investors will have to suffer loss. Generally, there are two types of orders:
- Stop market orders
- Stop limit orders.
We have to apply some tips to make the most of the stop-loss orders:
Stop Loss Take Profit Strategy: Top 10 Tips
- For active trading, we should not use stop loss orders. A stop loss order fulfills the little purpose for those investors who always watch their screens and involve in day trading.
- We should watch for hidden charges. For these traders, different stock brokers apply different rates.
- We should never think a stop loss order has filled successfully. The trade confirmations page should always be double checked to confirm that the order was filled in its entirety.
- To get the real placement you should always give the stock at least 5% of space to stay away from market maker abuse. A stop loss should not be higher than $95 if the stock is trading ay$100.
- For large positions do not use stop loss orders. Due to insufficient order filling, investors purchasing blocks of shares stop loss orders may hurt more than they help.
- New investors should use only stop market orders..If the stop market orders once triggered, it will simply sell at the recent market price. For filling in their entirety, stop limit orders are more prone to failure and advance.
- To set up a profit vs loss ratio use stop-loss orders. For the highly successful investor’s profit vs loss ratios are a key tool and to keep the discipline portion of the strategy intact, stop-loss orders can help.
- For after-hours trading, gaps keep an eye out. You may learn more by reading Stop gap breakouts.
- We have to set the trigger price in common price increments. There is a smaller chance of the stock trading through the order trigger you have to place the trigger price at a common increment.
- We have to use the stocks that have high average daily volume. To ensure the trigger price is hit (see #9) we have to know that liquidity is important. There would be a higher risk of the order to be traded through if the average daily volume is less than 100,000 shares.
Using Stop loss take profit strategy you can make huge profits. Also one can easily use the stop loss orders. You have to trade wisely.