How to Determine Where set a Stop Loss Order?
Many traders effort to the chore of deciding where to place their trading order placement. Traders don’t want to put their stop loss order too far away and drop too much investment if the stock price shift in the opposite direction. On the other hand, traders don’t want to put their stop loss order to close and lose the investment by being taken out of their investment too early. So where should you put your order? Let’s take an overview on the following two important strategies that you can apply to decide where to set your stop losses: 1) The Percentage Method for Stop Loss Order The percentage method for stop loss order is one of the most recommended methods, traders use in their portfolios as important tool. One motive for this process’s recognition is its simplicity. Most of the traders have to process this when using this technique is calculating the percentage of the stock price you are agreeable to give up before you leave your dealership. For an example, if you choose your comfort zone where a stock lose of 10 percent of its value before you terminated, and you have a stock that is to deal at $20 per share, here you would put your stop loss order at $15-$5 below the present market price of the stock at ($20 x 10% = $2). 2) The Support Method for Stop Loss Order The support method for stop loss order is more difficult to execute than the percentage technique, but it also allows you to change your stop loss order to the stock you are dealing. To use this technique, you need to be intelligent to recognize the stock’s most current position of support. Once you have to process that, all you have to perform is place your stop loss just below that level. For an example, if you have a stock that is presently dealing at per share and you distinguish $14 as the most current support level, you must put your stop loss order just below $14. You may speculate why you wouldn’t immediately put your stop loss order level at $14. The basic motive is you want to provide the stock a slight bit of squirm room before choosing to terminate your trade.