Most of the people frustrated while placing stop-loss because most of the time share price crossed those price points, then share price u-turn and bounce back. most asking questions is Where To place the stop loss(SL). so that you can exit after crossing your loss taking limits.
Why we use Stop Loss (SL) strategy in the share market?
Stop-loss helps you to save your money while share price in the opposite direction.you can exit from the stock and save your money with limited losses.
Invested in the stock market has lots of risks. In this situation, investors and trader’s trying to use the best exit strategies so that their money will be safe.
Where to place the best Stop loss strategy in the share market
First of all investors and traders’ stop-loss strategies are different from each other.Many people place SL 1% , 2% , 3%, 4% ,5% and etc. But should you do the same? Or where you should exit from the stock. Here some tips.
Stop loss Strategy for traders:
- What you can do while trading there are many types of trading strategies people follow.
If you are doing scalp trading then you can use SL as a money management way. Like, try to earn $2 and lose $1.You can follow the risk to reward ratio as an exit position in the share market. - Intraday trading: for Intraday trading here some critical things can happen to you, that is any big players can play share price throughout the day. Let’s have an example: If big players buy the stock for intraday then suddenly the share price will go up. then they will sell a little bit of share and will hit your stop loss. again the stock price will bounce back and the price will go upward. then again you will enter the stock again will cross the price point. after hitting SL multiple times. you will be frustrated and don’t give SL. in this time share price will fall because big players will sell their stock.
- Positional trading: for positional trading, you can follow risk to reward ratio like earning $2 and loss $1. or you can use the exponential moving average(EMA) as a stop loss.
Why You should use the moving average as SL?
The reason behind using the moving average. Most of the investor use moving average as an exit point. If share price fall and moving average break then most of the investors will exit from the stock, then there is a strong possibility share price can fall more.
Stop loss Strategy for Investors:
What You should do while investing? you are investing in the stock market for long term purposes Here some points you can follow as a stop loss.
- If any news that will affect invested companies business for the long term then you should exit from the stock.
- Management issue: companies management is the driver of the company. Good Management of the company can make you rich. Their vision of the can change the company’s future.if you find any management issue then you can’t expect a good future of the company.
- Price falling: If invested share price falling too much without any news. In this situation, you also have to exit from the stock at a certain price. Most people use the moving average as an exit point.
- You can use strong moving averages like 50 day’s moving average, 100 day’s moving average, and the last 200 day’s moving average. If share price break 200 day’s moving average. then You shouldn’t stay in the stock. Because you don’t know what happening to the inside of the stock. We are a retail investor so our reach isn’t good. we got very late information. So if share price break moving average like this you have to save your money using a stop loss.
Conclusion:
Stop loss is necessary to stay in the market. without stop loss, your possibility of surviving in the stock market is less.
This article for educational purposes. I recommend you study more invest less. also, follow these tips without investing or trading for some days then your mind will be clear.
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