When a trader places an order and watches the market move in the opposite direction, they will definitely feel frustrated when forced out. At this point, they will deeply feel the importance of setting stop loss orders. Here's how to set up stop loss orders to reduce risk and maximize profits
Have you ever encountered the phenomenon of watching the market move in the opposite direction after placing an order, causing you to be forced out? Or perhaps you try to follow the trend but exit trading when the market retreats? Then you feel: Ah, the market has been manipulated!
Why is this happening? This is because you set the stop loss to the same level as everyone else, which makes it easy for you to become a stop loss target. But please don't worry, everything will change. In this article, we will introduce how to set up stop loss orders to reduce risk, maximize profits, and avoid being stopped.
1、 Setting a stop loss is the best trading tool
When the market is unfavorable to you, stop loss orders can cause you to withdraw from trading.
For example, you buy Apple stock for $100 and set a stop loss at $90. This means that if the trading price of Apple stock drops to $90, you will immediately close your position and exit the trading, limiting the loss to $10 (assuming there is no sliding point). Not only that, the benefits of stop loss also include:
Preventing warehouse explosion
Surviving in the cruel financial market
2、 Stop loss order is a risk management tool, which is used to protect investors' positions when the market price fluctuates, and automatically execute trading operations when the set stop loss price is reached.
The following are the steps to set a stop loss order:
1. Determine the stop loss position: The stop loss position is determined based on factors such as market conditions and investment plans. Usually, the stop loss point should be slightly lower than the buying price or slightly higher than the selling price.
twoSelect stop loss order type: Stop loss orders are divided into two types: market price stop loss orders and limit price stop loss orders. Market stop loss order means that when the market price reaches the stop loss point, the position is closed at the best available price; A price limit stop loss order refers to closing the position at the specified price when the market price reaches the stop loss point. Choose the appropriate type of stop loss order based on personal preferences and market conditions.
3. Set the validity period of stop loss orders: Stop loss orders can have a validity period set, which will be automatically revoked after the validity period is exceeded. Investors need to reasonably set the validity period of stop loss orders based on market conditions and investment plans.
4. Consider transaction costs and sliding points: When setting stop loss orders, it is necessary to consider factors such as transaction costs and market sliding points to avoid frequent stops caused by overly tight stop loss positions.
5. Monitor market trends and make timely adjustments: When the market fluctuates, it is necessary to follow up on market trends in a timely manner and make appropriate adjustments according to the situation to avoid setting stop loss points too rigidly.
In short, setting stop loss orders requires flexible adjustments based on personal and market conditions, while strictly implementing risk control strategies to protect investors' positions.
【 EBC Platform Risk Reminder and Disclaimer 】: There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice.