March 20, 2018

Question:Why is "Stop Loss" so important? and How to setup "Stop Loss" properly for my positions?


Establishing the risk levels in your portfolio is one of the basic principles of Investment Management.

Over the long-term, any investment in an asset involves risk.

The use of Stop Loss command is absolutely necessary in order to manage the capital properly.

The advantages of the Stop Loss command is that it is automatically triggered and is not dependent on the investors psychological ability to execute the trades intentionally.

The Stop Loss takes decisive action for investors.

Changing “Stop Loss” place

Therefore, the combination of using technical analysis to determine the appropriate place for the stop loss and the rules of proper Financial Management are the factors which determine the appropriate size of the trade.

There by neutralizing the psychological influence in determining the size of trades.

The most effective way to manage “Stop Loss” command is to keep dragging it in the direction of the trend, immediately after a trend progression has been identified.

The “Stop Loss” command should be dragged to new point in the open position in the first stage tried to move the “Stop Loss” to the balance point.

From this point onwards, the trade can no longer lose. At this point you can open another trade since the risk allocation has opened up.

In the second stage, try to move the Stop Loss to profit point, thereby ensuring that the trade will result in a profit.

While opening trades, it’s important to define an exit point at which profits will be taken.

This can also be performed automatically most of the time, profits taken at the exit point will be two to three times the amount we are risking.

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