Utilizing Stop Loss Orders Correctly To Minimize Losses In Stock TradingUtilizing Stop Loss Orders Correctly To Minimize Losses In Stock Trading

There are many ways to trade in the market. You got certain methods, which as a seasoned trader, you need to know about. One of them is the stop loss trading method. This is a popular method of trading. The main thing is to know why the stop loss method should be used. When you hear somebody saying that their stock is higher than 50%, then you know that they are making money.

But, what about the protection of the money gained. You do not have to be surprised to learn that they have done nothing about it. You need to know that when they have not protected their profits, then it can disappear in the market in a few days time. But, when they tell you, they got a stop loss plan then you know that they are making profits to stay.

The market is volatile, and that is why, it becomes crucial that you have strategies in place to ensure that you do not lose out on your gained money. Many traders are not able to take successful trading decisions because they do not have an exit strategy. As a successful trader, you need to make sure that your starting and ending points are well planned.

What is a Stop Loss?

A stop loss helps traders to stop the losses that can happen in a market. Though you might lose few trades, you are relaxed because you know that you have decreased your losses. To be honest, not all traders make use of the stop loss trading method. You could say they feel that they do not want to use this method.

But, you would be amazed to know that, many traders who have made profits, use this method. The reason for that is very simple. When the market is not moving in the direction, just get out.

You could say that as a mental stop.

Below are some reasons why they are not always used.

Traders are not aware

The more reason why stop loss method is not used in trading is because some traders are not aware about it. Though, it might sound hard to believe, many traders do not have any knowledge on this trading method. Mostly, traders who are short term do not use this trading method. However, it is advisable that as a successful trader, you would want to make yourself known to all the trading techniques.

You never know when you might need to use this form of trading.

Some brokers do not allow stop losses

Some brokers do not allow losses on the stocks which are higher than a price. You could say that probably, they do not know that this form of trading exists, which is not ideal for trading. It is not a good sign of a trader as you would want to make sure that the money invested has proper returns.

If you notice that your broker does not allow stops, then you will want to get yourself another broker.

Few times a stock exchange places temporary ban on stops because of market volatility

When the market conditions are volatile, then the stock exchange places a temporary ban on the stops. In these situations, you cannot do anything about this situation. But, you will want to see that it is temporary. In such instances, you need not trade and can also make use of a mental stop. When you select the mental stop, you might want to ensure that you watch the market keenly and use the mental stop when the situation is perfect.

So, use stop loss orders to decrease your losses.

"Carl Jones is an independent trader that loves to write about trading and is regularly published on http://insideouttrading.com/"

by Carl Jones_2013
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"Carl Jones is an independent trader that loves to write about stock trading and is regularly published on http://insideouttrading.com/"
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