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Strategies & Market Trends : Underexposed Technical Analysis -- Ignore unavailable to you. Want to Upgrade?

To: kimberley who wrote (685)	12/20/2019 9:14:39 PM
From: Underexposed	Read Replies (1) \| Respond to of 914

Hi Kimberly I thought I would give my thoughts on Stop-loss and Limit Stop-loss. How many times have you seen a stock take a deep plunge one day and then recover a significant amount the next day or so....??? I my opinion, this happens quite often and can be very frustrating. Both Stop-loss and Limit Stop-loss orders are designed to provide protection to maintain your profits through an automatic sale of your stock when a stock price reaches a predetermined point. Are the two orders the same.... not at all.!!! The Stop - Loss order issues a market order to sell your shares when a share price falls to a certain point. Let us say the stop loss point is $30.00 but the plummet is very fast and your market order is low on the totem pole for sale... Instead of triggering immediately the share price rapidly falls to $20.00 where your market order now kicks in and your shares are sold. Then that spike ends and the share price rises again to end the day at say $28.00/share... Your shares are sold but at a price that was not within your control. The LIMIT Stop - Loss order issues an order to sell your shares when a share price falls to a certain point and that order to remain in effect as long as the price is in a certain range. once outside that range the order is halted. Let us say, we set a Limit Stop-loss order with a sell order at $30.00 but the sale is cancelled when the share price falls below the $28.00 limit. Now if the share price is on a slow slide through the $30 - $28 range the shares will be sold as it wanders through that range... the order does what it is designed to do.... protect you gains giving you a reasonable return. If the price plummets through the $30 - $28 range then the shares won't be sold unless through luck an order was filled before it fell through the range... Now you are still in control as to what price you will get for your shares. If you anticipate a rebound you can wait for it and sell your share at a higher price than if a simple market order were issued for you shares. You could cancel the original limit Stop-loss order and set another where the plunge stopped and follow the rise of the stock, setting higher ranges as the price rises and eventually selling them when the price enters that new range Here is another way I use a limit Stop-loss order Let us say a stock price is falling toward a support...say $30/share. I don't really want to sell the stock as it may hit the support and bounce back....but it could fall through that support....what to do....what to do?? My solution to taking the emotion out of that decision is to set a limit Stop-Loss order. I don't set the trigger right at the Support value as often this level will be tested before rising again. Rather I would set the trigger slightly below the support with a few dollar range. In this case my order may be a Limit stop-loss order with a trigger at $29.00 with a limit of $27.00 I am protecting myself from a continued fall but giving the stock a chance to redeem itself by rising from the $30 support level.... it reduces the emotion of selling the stock....selling is my most difficult part of stock transactions. Anyway, This may be not rocket science but it took me a while before I figured this out. Merry Christmas Kimberly Your contributions are appreciated UE