Insurance

Stop Loss

Stop loss order is an insurance that can be used against sudden changes or crash in the market to limit the losses.
Hence the limit can be as low as 1% only. so the max loss will be 1% of the trade that went wrong.

A stop-loss order is an order placed with a broker to buy or sell a specific stock once the stock reaches a certain price. A stop-loss is designed to limit an investor’s loss on a security position. For example, setting a stop-loss order for 2% below the price at which you bought the stock will limit your loss to 2%.

Remember that the key difference between a limit order and a stop order is that the limit order will only be filled at the specified limit price or better; whereas, once a stop order triggers at the specified price, it will be filled at the prevailing price in the market—which means that it could be executed at a price.

 

What is the best stop loss strategy?

  • As a day trader, you should always use a stop-loss order on your trades. …
  • A good stop-loss strategy involves placing your stop-loss at a location where, if hit, will let you know you were wrong about the direction of the market.