How To Use Stop Loss Orders

 

Stock Trading Courses Need to Explain Stop Loss Orders

 

Stock Trading CourseA comprehensive stock trading course will teach you how to properly use stop loss orders – a critical tool that will help you to protect your trading capital from significant losses. For starters, stop loss orders can be set to automatically sell a stock or option when it hits a particular price and their use can be especially effective if you are trading options or shorting a stock where there could be unlimited trading losses. Hence, a good stock trading course will teach you how to properly set stop loss orders based upon what you are trading.

 

Stop Loss Orders and their uses

Sell stop orders. A good stock trading course will teach you the ends and outs of sell stop orders and provide you with real world examples of how they have been used. Specifically and should the value of a stock drop below a particular price, a sell stop order will be an effective tool to ensure that a stock is sold for the next available price when the sell stop price is reached. For example: If you are worried about a stock that is currently worth $100 will drop to $85 or below, you can issue a sell stop order right at the $85 price level. In addition, you can use a sell stop order to lock in trading profits by placing one at a level higher than the stock’s original purchase price. For example: If the $100 stock that you own suddenly rises in a volatile market and you feel it may then quickly fall in price, you can have a sell stop order at the $115 level and lock in your profits.

Buy stop orders. A good stock trading course will not only teach you how to short stocks, it will also teach you how to use buy stop orders to protect yourself from unlimited losses. For example: If you are selling a stock short and will be exposing yourself to significant and potentially unlimited loses should the market move in an unexpected direction, you can place a buy stop order at a certain price above the stock’s current market price. By doing this, you will limit your trading losses should the price of the stock start to rise.

Stop limit orders. Finally, a good stock trading course will teach you how to use stop limit orders as these types of orders combine the features of both a stop loss order and a limit order. For example: You can set a stop limit order to buy or sell a certain predetermined amount of stock when a stock’s sell stop or a buy stop order price is reached. This will help you effectively lock in profits or limit the risk of potential losses.

By taking a comprehensive stock trading course, you will learn how the above types of stop loss orders can best be utilized as part of an effective stock trading system that will protect your trading capital and earn you long-term profits.

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