My stock market trading tips about using stop-loss order
I do not do any trade without using a stop-loss order. I learned several lessons in the past how it can be bad to trade without a good stop-loss policy in any stock trading strategy.Here is list of my stock market trading tips for using stop-loss:
- Do not enter your trade if you do not know your max. risk level.
Plan your trades. Every trade must have defined
entry,
stop loss
and
target
levels before you enter trade.
- Place the stop-loss order immediately after you enter the trade.
I enter this exit order immediately after I enter the stock trade. I do not use a mental stop. I want to be out as soon as my stop-loss level is hit. Any more thinking is the way to bigger losses.
- Regularly evaluate and monitor your trade and trail your exit level.
I monitor my open trades. I move my stop-loss level into more favorable levels any time I see that trade is moving enough in right direction. I have several rules for moving stop-loss.
- If you are day trader, then use a trailing exit order.
Day trading is a very quick style of trading, and therefore, using a trailing exit order is a good solution to use your computer to automatically move your exit level in the right direction.
- Define your stop-loss strategy for special purposes like gap down or gap up open.
Open time is a special case for stock markets. Sometimes the stock opens with a gap; it’s when the opening price is much different from the previous closing price. It can be much worse than your exit level. So it is good to have a prepared special set of rules for how the situation will be handled.
And finally remember, the first stop is usually BEST stop-loss level. Any time I tried to avoid my stop-loss level I prepared in advance, I was beaten. Every time I thought that the price would return to the previous level, I suffered a bigger loss than I planned. It’s not good to use hope in your trading
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