Stock market Stop Loss order Traders best friend
What is a Stop loss order Stock Market?
The Stop-loss is an order that is placed with a broker for buying or selling a specific stock in the Stock market when that particular Stock reaches a certain price. Stop loss is specially designed for limiting the loss of a trader on a security position. For example, if you set a stop-loss order for below 15% of the price at which you had bought the stock then it will limit your loss to 15% Suppose you just purchased the stock of reliance at the price of Rs1600 and then you enter a stop-loss order of Rs1540. If the Stock falls below 1540 then your stocks will be automatically sold at the prevailing market price.
Stop-limit orders are like Stop-loss orders. As you can see their names states that there is a limit on the prices on which they will get executed. In a Stop - limit order two prices are specified one is the Stop price which converts the order to sell the order and the other is a limit price in this the order gets executed only at the limit price.
Advantages of a Stop-Loss order
The best benefit of a Stop-Loss order is that it doesn’t cost you a single penny to implement. The regular commission-only gets charged when the stop-loss price reached and the stock must be sold. The Stop loss order in the stock market also allows you to make decisions without getting into any emotional influences Many times people fell in love with Stocks in the stock market and they keep thinking that if they would give another chance to the stock in the stock market then the stock will turn around to be beneficial but in reality, this delay cost them big losses.
If you are an investor in the Stock market then you must need to know why you own stock in the Stock market. However, the criteria of a value investor would always be different from a Growth investor. No matter what is your strategy and how effective it is, it will only work when you will stick to the strategy and if you are a hardcore Buy and hold investor then my friend Stop loss is useless for you.
It is also important for everybody to understand that there is no guarantee that a stop-Loss order will make money in the Stock market, you always have to make intelligent investments and if you would not do that then you will lose your money in the Stock market.
The Stop loss order is a Simple Stock market tool but still, many Investors fail to use it properly. If you want to prevent huge losses and want to book profits then Stop-loss is an insurance policy for you in the field of the Stock market.