Analyzing Graphs

Lesson 11: Stop Losses

In this Chapter, we will be discussing what are stop losses and whether or not you should set a stop loss. A stop-loss order is an order placed with a broker to buy or sell a security when it reaches a certain price. Stop-loss orders are designed to limit an investor's loss on a position in a security and are different from stop-limit orders. Stop losses can be physically set on your trading platform or you can have a mental stop loss. Please watch this video on Sky View trading and their take on Stop loss

Chess Game

How to manage Risk?

Key Points:

  1. Stop-loss Orders. A stop-loss is an outstanding order placed in advance to automatically sell a position—whether it’s a stock, bond, exchange-traded fund (ETF), or mutual fund—when it reaches a specified level. When the position reaches that specified level, whether it has fallen or risen in price, your stop-loss order automatically kicks in. There are two main types of stop-loss orders.                                                                                                                                    

  2. Don't Market order stop losses. Use your limit when cutting losses.                                                                                                   

  3. Position sizing refers to the size of a position within a particular portfolio, or the dollar amount that an investor is going to trade. Investors use position sizing to help determine how many units of security they can purchase, which helps them to control risk and maximize returns.                                                                                                                                                                                                                                                   

  4. Protect your money!                                                                                                                                                                                                                                                                                                 

  5. Watch the videos!                                                                                                     

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