|
A stop loss is a method of accepting a loss when is stock moves against you in order to prevent and kind of major loss.
With day trading this is a mental note rather than a pre-programmed amount because things are changing so fast.
2 Examples:
You enter a point and don't have a clear exit strategy if a stock goes against you. A stock them moves against your position. Before you know it you have huge losses and you are hoping for a turn around in a state of despair. You have been subjected to unnecessary pain and losses because you didn't have a stop loss clear in your mind before you entered a position.
You buy a stock and it suddenly turns around and begins to go down. You get out and take a small loss. The stock continues to go down and you wait patiently to re-enter or you switch positions and go sell that stock if market indication and sentiment allow. You turn your loss into a profit.
Always have an exit strategy!
|
