Tuesday, 20 March 2018

Do stop loss actually reducing risk of the share market traders?

A stop-loss is a type of advanced trade order that can be placed with most brokerages. The order specifies that an investor wants to execute a trade for a given stock, but only if a specified price level is reached during trading. This differs from a conventional market order, in which the investor simply specifies that he or she wishes to trade a given number of shares of a stock at the current market-clearing price.

A stop-loss order is essentially an automatic trade order given by an investor to his or her brokerage – only be executed once the price of the stock in question falls to the specified stop price stated in the investor's stop-loss order. Such orders are designed to limit an investor’s loss on a position in a security.Share market tips providers also suggest trading with appropriate stop loss.

For example, let's say you are long 10 shares of XYZ Firm.When you bought for Rs 315.00 per share. The shares are now trading at Rs 340.00 per share. You want to continue holding the stock so you can participate in any future price appreciation it may see. However, you also don't want to lose all of the unrealized gains you have built up so far with the stock, and you would want to sell out of your position if shares fell to Rs 325.50.

Rather than watching the market five days a week to make sure the shares are sold if price drops, you can simply enter a stop-loss to essentially monitor the price for you. Based on the earlier example, you could input a stop-loss to your brokerage to sell 10 shares if the price falls to Rs 325.50. Stop Loss is one of the best ways to reduce the risk ratio as per the Intraday calls for today.

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