Stop Loss Order
Stop-Loss Order
What Does Stop-Loss Order Mean?
An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit an investor's loss on a security position.
Also known as a "stop order" or "stop-market order".
An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit an investor's loss on a security position.
Also known as a "stop order" or "stop-market order".
 | |
| Watch: Stop Loss Order |
Investopedia explains Stop-Loss Order
Setting a stop-loss order for 10% below the price you paid for the stock will limit your loss to 10%. This strategy allows investors to determine their loss limit in advance, preventing emotional decision-making.
It's also a great idea to use a stop order before you leave for holidays or enter a situation in which you will be unable to watch your stocks for an extended period of time.
Setting a stop-loss order for 10% below the price you paid for the stock will limit your loss to 10%. This strategy allows investors to determine their loss limit in advance, preventing emotional decision-making.
It's also a great idea to use a stop order before you leave for holidays or enter a situation in which you will be unable to watch your stocks for an extended period of time.
Read more: http://www.investopedia.com/terms/s/stop-lossorder.asp#ixzz1VQzc3UkP
Monday, August 22, 2011
Stop Loss Trading Tips for Long and Short Positions
Stop Loss Trading Tips for Long and Short Positions
Stop Loss Trading Tips
Setting Stops For Long And Short Positions
By RightLine Staff Writers
Setting Stops For Long Positions
Here are a few suggestions on how to set stops for long (buy) positions.
Jane, the Official Trading Rules Referee
The RightLine Report
Subscribe to RightLine
1. Set the stop just under yesterday's low unless yesterday was a big up day. Then move the stop closer to today's open.
2. Set the stop just under a recent minor support level.
3. Use the daily Average True Range to determine the expected movement for the stock, and set the stop just beyond the range amount. (ATR is a feature found in RightLine Charts.)
4. Set the stop the instant your buy order gets filled.
5. Move stops up as the stock rises, first to break even, then to protect profits. On a long position when you use trailing stops, don't lower stops - only raise them.
6. As the stock moves up and tends to "top out" or market conditions become unfavorable, "tighten the stop." In other words, move your stop closer to the current market price. Doing this will effectively employ an "up or out" strategy" - either the price goes up, or you are out of the trade.
Setting Stops For Short Positions
Here are a few suggestions on how to set stops for short (sell) positions.
1. On daily charts, set the stop just above yesterday's high unless it was a big down day. Then move the stop closer to today's open.
2. Set the stop just above a recent minor resistance level.
3. Use the daily Average True Range to determine the expected movement for the stock, and set the stop just beyond the range amount. (ATR is a feature found in RightLine Charts.)
4. Set the stop the instant your order gets filled.
5. Move stops down as the stock declines, first to break even, then to protect profits. When you use trailing stops on a short position, don't raise stops - lower them.
6. As the stock moves down and tends to "bottom out" or market conditions become bullish, "tighten the stop" which will effectively employ a "down or out" strategy.
Stop Loss Trading Tips
Setting Stops For Long And Short Positions
By RightLine Staff Writers
Setting Stops For Long Positions
Here are a few suggestions on how to set stops for long (buy) positions.
Jane, the Official Trading Rules Referee
The RightLine Report
Subscribe to RightLine
1. Set the stop just under yesterday's low unless yesterday was a big up day. Then move the stop closer to today's open.
2. Set the stop just under a recent minor support level.
3. Use the daily Average True Range to determine the expected movement for the stock, and set the stop just beyond the range amount. (ATR is a feature found in RightLine Charts.)
4. Set the stop the instant your buy order gets filled.
5. Move stops up as the stock rises, first to break even, then to protect profits. On a long position when you use trailing stops, don't lower stops - only raise them.
6. As the stock moves up and tends to "top out" or market conditions become unfavorable, "tighten the stop." In other words, move your stop closer to the current market price. Doing this will effectively employ an "up or out" strategy" - either the price goes up, or you are out of the trade.
Setting Stops For Short Positions
Here are a few suggestions on how to set stops for short (sell) positions.
1. On daily charts, set the stop just above yesterday's high unless it was a big down day. Then move the stop closer to today's open.
2. Set the stop just above a recent minor resistance level.
3. Use the daily Average True Range to determine the expected movement for the stock, and set the stop just beyond the range amount. (ATR is a feature found in RightLine Charts.)
4. Set the stop the instant your order gets filled.
5. Move stops down as the stock declines, first to break even, then to protect profits. When you use trailing stops on a short position, don't raise stops - lower them.
6. As the stock moves down and tends to "bottom out" or market conditions become bullish, "tighten the stop" which will effectively employ a "down or out" strategy.
Thursday, August 18, 2011
Commodity Systems Inc.
Welcome to CSI, the world's leading supplier of accurate daily updates of O-H-L-C-V-OI data on world markets complete with official day volume and open interest statistics, and historical market prices reaching back over 60 years. Daily updates on futures, options, stocks, and cash prices are supplied via the Internet after daily market closings. Coverage includes all commodity markets traded worldwide and western world stock markets. 99% of the markets extend from the first day of trading. Users are attracted to CSI because of our reputation & unparalleled scope, accuracy, and longevity. We supply summary data to Yahoo!, and hundreds of other resellers who capture daily info through a File Transfer Protocol (FTP). CSI is ranked #1 in the world for accuracy. That study involves all known vendors of market information.
Futures Magazine - Stop Orders
http://www.futuresmag.com/Exclusives/Pages/Using-Stop-Orders-to-Enter-Positions.aspx
Rick has been involved in various aspects of the futures and options markets, including positions as an economist and derivatives market analyst at the Bank of Canada and Finex. In 1996, he founded World Link Futures Inc. to serve the beginning futures trader.
A stop order is a type of contingent order that instructs the floor broker to buy or sell if the market price moves to a certain point, that point being the stop price. Stop orders are known for their value as a risk managementtool. An open futures or options position can be protected with a stop order. If prices move unfavorably (to the stop price), then the stop order is executed and the open position is closed, thereby ending any further loss on the position.
A customer who purchased one August gold futures contract at $285, for example, might enter a stop order to sell one August gold futures at $275. If gold prices decline to the stop price of $275, then the stop order will be executed and the long position will be closed. Using stop orders for the purpose of risk management is emphasized in introductory investment books and most beginners are aware of it. However, I have found that many beginning traders are unaware that stop orders also can be used to enter a new position.
Why would you use a stop order to enter a new position?
Consider the case of a commodity that has been trading within a range of 80 to 100 for the last several weeks. The trader believes that if the commodity breaks out to 105, it will continue to rally to 125. But if the commodity breaks below to 75, it will continue to decline to 55. Many beginners erroneously believe that a limit order or a market-if-touched order are the proper types of orders to use in these cases. They are not. The proper order to use is the stop order. It's a good idea for beginners to paper trade for a while until they fully understand how these various orders work or, if trading for real, establish a broker-assisted trading account to avoid costly errors associated with incorrect order usage.
For the example above, the trader should enter a good-till-canceled stop order to buy at 105 and a good-till-canceled stop order to sell at 75. In the former case, if the market rallies to 105, then the stop order will be executed and the trader will be long the contract. At this point, the trader should cancel the outstanding stop order to sell at 75. In the latter case, if the market declines to 75, then the stop order will be executed and the trader will be short the contract. At this point, the trader should cancel the outstanding stop order to buy at 105. Finally, note that once a trader has a position, he then should use a protective stop order in the same manner as was described in the opening paragraph.
Using stop orders to enter a position is ideal for trading strategies that rely on contracts breaking out of a price range. Since many contracts spend a good deal of time range trading before resuming or continuing a trend, a trader will find many opportunities for using stop orders in this manner. In fact, a trader may have several stop orders working for him at any given time. As markets break out of their trading range, positions will be established as stop orders are filled. This way a trader does not have to watch prices all day to wait and see a breakout move. The stop order is in place already and will be executed if the movement occurs.
Rick has been involved in various aspects of the futures and options markets, including positions as an economist and derivatives market analyst at the Bank of Canada and Finex. In 1996, he founded World Link Futures Inc. to serve the beginning futures trader.
A stop order is a type of contingent order that instructs the floor broker to buy or sell if the market price moves to a certain point, that point being the stop price. Stop orders are known for their value as a risk managementtool. An open futures or options position can be protected with a stop order. If prices move unfavorably (to the stop price), then the stop order is executed and the open position is closed, thereby ending any further loss on the position.
A customer who purchased one August gold futures contract at $285, for example, might enter a stop order to sell one August gold futures at $275. If gold prices decline to the stop price of $275, then the stop order will be executed and the long position will be closed. Using stop orders for the purpose of risk management is emphasized in introductory investment books and most beginners are aware of it. However, I have found that many beginning traders are unaware that stop orders also can be used to enter a new position.
Why would you use a stop order to enter a new position?
Consider the case of a commodity that has been trading within a range of 80 to 100 for the last several weeks. The trader believes that if the commodity breaks out to 105, it will continue to rally to 125. But if the commodity breaks below to 75, it will continue to decline to 55. Many beginners erroneously believe that a limit order or a market-if-touched order are the proper types of orders to use in these cases. They are not. The proper order to use is the stop order. It's a good idea for beginners to paper trade for a while until they fully understand how these various orders work or, if trading for real, establish a broker-assisted trading account to avoid costly errors associated with incorrect order usage.
For the example above, the trader should enter a good-till-canceled stop order to buy at 105 and a good-till-canceled stop order to sell at 75. In the former case, if the market rallies to 105, then the stop order will be executed and the trader will be long the contract. At this point, the trader should cancel the outstanding stop order to sell at 75. In the latter case, if the market declines to 75, then the stop order will be executed and the trader will be short the contract. At this point, the trader should cancel the outstanding stop order to buy at 105. Finally, note that once a trader has a position, he then should use a protective stop order in the same manner as was described in the opening paragraph.
Using stop orders to enter a position is ideal for trading strategies that rely on contracts breaking out of a price range. Since many contracts spend a good deal of time range trading before resuming or continuing a trend, a trader will find many opportunities for using stop orders in this manner. In fact, a trader may have several stop orders working for him at any given time. As markets break out of their trading range, positions will be established as stop orders are filled. This way a trader does not have to watch prices all day to wait and see a breakout move. The stop order is in place already and will be executed if the movement occurs.
How to place a stop loss order
How to place a stop loss order or market order.
Limit your investment loss.
Limit your investment loss.
Subscribe to:
Posts (Atom)