STOP Loss Is An Important Part Of Each Trade

The traders who have traded using the 1G Profit System will let you know in their 1G Profit Review review that the system focuses a lot on placing stop loss. Traders spend a lot of time in deciding which stock to buy and at what price. They also decide on the target price of the stock. But what they forget at times to place a stop loss price on their stock in case the trade that they take goes wrong.

The automated trading software will ask you the risk that you are ready to take on each trade. The risk taking appetite is different for each individual. But when you place a stop loss on your trade it stops you for a small loss which is important else you may end up losing all your capital on a single trade.

 

The robotic trading systems make it mandatory to place a stop loss on every trade that is taken. The stop loss is nothing but an order that the software places with the broker to sell a stock or to buy it when the stock reaches a certain price. The stop loss basically limits the investor’s loss when they take a position on a security. So when you buy a stock thinking that it will go higher in price, you place a stop loss below the price at which you had brought the stock. If the stock does not move in the direction that you had predicted and it starts to go downwards, then you get out of the trade for a small loss called the stop loss.

 

The other advantage of placing a stop loss on your trades is that you will not have to monitor the stock and how it is performing. You may not be able to watch a stock when you are on say a vacation and if you are a long term trader then all that you need to do is to place a stop loss price and go enjoy your vacation. If the price reaches the stop loss it automatically gets out of the trade.

 

But there is also a small disadvantage of having a stop loss. The stop loss may get hit by any small term movement or volatility in the particular stock. So suppose you bought a stock and suddenly there is some bad news about the economy on the TV channels, traders panic and start selling the stock. Your stock just goes to the stop loss price and takes you out of the trade and in sometime when the panic has settled its starts to move in the direction of your trade. You thus lose some of your money only to see that the stock starts to go up and reach your target price.

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