 |
|
|
|
|
|
|
|
|
|
Now |
Home |
Business |
Economy |
In |
Center |
New |
Us |
|
|
|
|
|
|
|
|
|
|
Now |
Home |
Business |
Economy |
In |
Center |
New |
Us |
|
|
 |
 |
|
 ------------------------------------------------------- Stop Loss ------------------------------------------------------- Knowing the different order types and how your broker places those orders can save you thousands of dollars. First, whether you use software, the Internet or spreadsheets to track your trades begin all orders by writing them down on a piece of paper. As you are entering your order into your broker’s trading screen or telephoning your broker to place the order by writing it down before hand and using it as a script avoids mistakes that costs you money. Once the order is placed then either compare your written order to what you entered into the brokers trading screen or ask your broker to read back the order you gave to him/her. You should keep a journal of all trades and when your confirmation statements are available from your broker reconcile the confirmations against the orders you placed. You would think that in this electronic age that these types of errors would be eliminated – they are not! Reconcile your confirmation statements and your monthly statements timely.  Stop orders are used to exit trades that are currently open. Stop orders are treated as a pending order that will be activated once the price you specify is reached. This price is called a stop price. Your broker activates this pending order to sell a stock when the stock price hits the price you specify to exit the stock. The following list defines the different types of Stop orders:
The result of this order will be to maximize your profit as the stock price moves upwards or to minimize your loss as the price of the stock moves lower. The opposite is true when using the Trailing Stop Loss order to exit a Short Sale of a stock. Using a Stop Loss or a Stop Limit requires a review of the stock price at least once per day. If you have the luxury of reviewing stock prices during the day you should do so by 11:00 EST time and 2:30 pm EST. If you cannot review prices during the day, then, review prices once you get home from work and make any adjustments you deem appropriate to your Stop Loss orders.  These Stop transactions move with the price spread. The nice thing about these transactions is they save you time reviewing your portfolio. This is especially nice when you simply cannot review your portfolio during the day. Set your target loss price to what you are willing to accept as a loss and let that stand, however, as the market is moving up allow the Stop Loss price to move with the upward movement. Using this strategy allows you to protect your loss but maximize your profit when the stock begins to move up. Historically these more advanced Stop orders were only offered to brokers and traders working in the different exchanges. The Digital Economy is forcing full service brokers to compete with discount brokers, as a result, they are being forced to offer more services just to be competitive. Check the software you are using and talk to your broker about these advanced orders.  Up until now we have been discussing the different types of Stop orders and the impact they have on your portfolio. We now want to discuss having two Stop orders pending on the same stock at the same point in time. These are called conditional orders. Conditional Stop orders allow you to minimize your loss and take advantage of any spike up in price. Use a Stop Loss order to protect against drops in price, for example Sell xyz stock with a Stop Loss of 3%. Then, place another Sell order with a limit price either at your target or at least $3.50 above the opening price. This way if the stock price hits your target you are out of the trade or if the stock gaps up during the day you take advantage of the high price by capturing some profits. You can always reenter the stock after some additional analysis. Range bound stocks or channeling stocks are going through a definable price pattern. When stocks begin to break out of this pattern they display particular behavior. Changes in price behavior means the stocks are looking to form a new pattern. We are interested in all patterns because this is were we buy low and sell high! Some of the behavior a stock price experiences are gap up in price or spikes in volume or periods of rest followed by large single day price moves. This can be viewed by analyzing a stock price using candlestick charting. If a stock gaps up in price but closes at its opening price why not capture the profit? The conditional trade allows you to capture these profits as they occur. Not all brokers offer conditional trades. Then, there are some that do not offer conditional trades in their on line software but allow you to place conditional trades with the broker. Be careful in these situations that you understand the commissions that will be charged against the trade. They are usually much higher than the commission of placing a trade without a broker.  To learn more about how to use the different order types and which strategy produces profits while investing with range bound stocks – Join now!  Back | Swing Trading | Day Trading | Significance of Volume | Daily Gap Cycle | Overnight Average | Stop Loss | | Range Bound | Continuation | Strategies | Practice Trades | Performance | Cancel | Options | Useful Links | | Order Now | Return Home | Home Business | Digital Economy | Sign In | Disclaimer | Training Center | FAQ | What's New | Contact Us | |
||
 |
 |