Stop Loss Stocks Order Summary: Points To Remember When Putting

The key to placing top loss orders in stock trading isn't to set too tight or too far & not exactly on the support or resistance areas.

A few pips below support or above resistance zones is the best place.

If you are going long (buying a stocks instrument), just look for a nearby support level which is below your trade entry point and put this order about 10 pips to 20 pips below that support level. The example illustrated and explained below show the level where one can put their stop orders just below the support level on a stocks trading chart.

Support Level For Setting Stop Loss Stocks Order Level For Buy Trade

If you are going short (selling a stocks instrument), just look for a nearby resistance level which is above your entry point & set this stop order about 10 pips to 20 pips above that resistance level. The example illustrated and explained below show the level where one can put their stop orders just above the resistance level on a stocks trading chart.

Resistance Level For Setting StopLoss Stocks Order Level For Sell Trade

You can also use stop loss orders to lock in trading profits, Not for just Preventing Losses

The advantage of a stop loss order is that you don't have to monitor the trading market on a daily basis how the stock market is performing. This is especially handy when you're in a situation that prevents you from watching your positions for an extended period of time, or when you want to go to sleep after trading the whole day.

The disadvantage is that the stocks price at which you set these orders could be activated by a short-term fluctuation in stocks price. The key is picking a stop loss order percentage that allows stocks price to fluctuate within the day to day range while preventing the downside risks.

These stocks orders are traditionally thought of as a way to prevent losses thus the name. Another use of these stop orders is to lock in the profits, in which case it's referred to as a trailing stop loss.

For a trailing stop loss order it's set at a percentage level below the current market stocks price. This trailing level then adjusted as the trade transaction unfolds. Using a trailing stop loss level allows you to let the profits run while at the same time ensures that should the stocks market turn you will have locked in some of your profits.

These stocks orders can also be used to eliminate risk if a Stocks trade position becomes profitable. If a trade transaction makes some substantial gains then the stop loss order can be moved to break even point, the place at which you bought, thereby ensuring that even if the trade transaction moves against you, you'll not make any loss, you will break even on that trade.

Trailing stop stocks orders are used to maximize & protect profit as stocks price rises and cap losses when the price falls.

A good examples is when you use the parabolic SAR Stock Indicator and keep moving your stop order to the parabolic SAR level.

Parabolic SAR Stocks Technical Indicator for Setting Trailing StopLoss Stock Order in Stocks

Another example is where one moves his stop loss order by a certain number of pips after every few hours or after each hour or after every 15 min depending on the Stocks Trading chart timeframe that the trader is using.

In the stocks example above the parabolic SAR Indicator which had a setting of 2 & 0.02 was used as the trailing stop loss for the above chart. The trader would have kept moving the trailing stop loss order level up after every SAR was drawn until the time when the Parabolic SAR was hit and the stocks trend reversed.

ConclusionA stop loss order is a simple tool, yet so many investors fail to use it. Whether it's used to prevent excessive losses or to lock in profits, nearly all trading styles can benefit from this trading tool.

Points To Remember When Placing These Stop Loss Orders

Here are some important points to remember:

• Be careful with the points where you put these stop orders. If a stocks instrument normally fluctuates 20 points, you don't want to set your stop order too close to that range else you will be taken out by normal market volatility

• Stop Loss Stocks Orders take the emotion out of a trading decisions and by setting one you set a pre determined point of exiting a losing trade, meant to control losses.

• Traders can always use technical indicators to calculate where to set these zones, or use the concepts of Resistance and Support to decide where to set these stop loss orders. Another good indicator used to put these stop orders is the Bollinger bands indicator where traders use the upper and lower band as the limits of stocks price therefore placing these orders outside the bands.