Posted by forex at 1:39 AM
Read our previous post
1. Tell your broker you want to set a stop-loss order on a security at a particular price. If the stock reaches that price, the broker then sells it at the best market price that's immediately available. If you do your own investing online, you'll find many financial-company websites allow you to issue stop-loss orders yourself. Some investors favor stop-loss orders because they take the emotion out of making selling decisions during a sometimes wildly fluctuating market.
2. Take care in setting your stop-loss limits. If you know a stock typically fluctuates eight to ten points, you may be able to keep from selling the stock on a typical downswing by not setting your stop loss too close to the fluctuating range.
3. Understand that stop-loss orders offer no guarantees because a stock price can fall so quickly that you may be fortunate to even come close to your target price. However, stop-loss orders do offer some protection against major losses, and you won't need to monitor stock performance on a daily basis.
4. Be aware that stop-loss orders in the form of 'trailing stops' can be used to lock in profits as well. For example, if you set a trailing stop at a percentage below a current stock price, and that stock realizes a significant increase, your trailing stop will lock in at a price near the percentage you set, making it the worst price you would receive if the stock begins to fall.