When buying shares of a company, you are eager to make profit. After share prices go up, you rapidly sell with a modest net profit. If share prices decline, you will do the opposite: you will most likely hope they will rise again. Don’t, you will lose more money. That’s why I think that, on every stock you have you should place a stop-loss. For example, if a stock is currently valued at 100 euro, set a stop-loss order at 90 euro. This will sell your shares after the price goes below the stop price and reduces the chance of making an even greater loss.
Dimi
Dimi
2 comments:
Instead of dumping stocks early, raise your stop-loss as the stock rises. Exactly how far below the current price to set the stop is a matter for a long discussion. It depends in large measure on how volatile the stock is and what your risk-tolerance levels are. One useful method is called Parabolic SAR. It's complicated to calculate but there's an Excel spreadsheet somewhere on the net for it. Doing it by hand isn't hard either.
Good luck with your trading.
That's exactly what I do.
When stock prices go up, my stop-loss also rises.
With volatile shares I increase my stop-loss level (from -10% to -15% for example).
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