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  • Category: Stock Market

    How can I keep trailing stop-loss in a given stock?


    Interested in investing in stock market? Want to know how ot use stop-loss for each stock? Find advice from our financial experts on this page.

    I have stared investing in stock market. I want reduce my loss and that is why I am using stop-loss for each stock when I buy it. I do not know how to keep trailing stop-loss for a particular stock already bought and is in uptrend. Can anybody give me steps?
  • Answers

    3 Answers found.
  • If you want to seel the shares which you are already own you can ask your broker to sell them when the price reaches a certain high or low rate. Once the price reaches the set range an automatic order will get triggered. This is basically a tool useful for short-term investors. It can be used when the investor doesn't monitor on a day-to-day basis. This tool is helpful for small investors.
    There are two types of Stop Loss Orders namely
    Stop Loss Market: This is an order to buy (or sell) a share once the price of the share reaches a maximum or minimum
    Stop Loss Limit: This is also similar to stop-loss order. There will be a limit on the price at which they will execute.

    This can be done online. When you open the share account all the holdings will be shown there. Click on the share for which you want to give this order.
    A screen will open up. On the top right-hand side, you will find SL and SL.M. You can select any one among them
    In the next line, you will find the Target price. You fix the target price and click on sell. Then automatically information will be sent once the target price is reached.

    drrao
    always confident

  • Stop-loss order is a type of order to limit our losses when we transact in share selling or buying. Let us take an example where we have bought a share at a price of say Rs 400 and now we are apprehensive that it might go down. So we would place a stop-loss order either online or with our broker and we have to specifically tell at what value it has to be sold. Suppose we tell that if the stock goes down to Rs 380 then sell it. So if the share price goes down then as soon as it reaches Rs 380, it would be sold but not before that. So our loss is limited to Rs 20 per share.

    Trailing stop-loss, as the name suggests, trails the market price of the share and from that price calculates the pre fixed percentage to sell the share to limit the loss. For example to understand it let us assume that we have bought a share for Rs 300 and now we order a trailing stop loss of 5% so if it goes down then it would be sold at Rs 300 - 5% of Rs 300 = Rs 285. But suppose it goes up and then starts coming down from Rs 360 then while coming down as soon as it reaches Rs 360 - 5% of Rs 360 = Rs 342, it would be sold. So, this is a good type of order as compared to the fixed stop-loss where there is no trailing.

    We have to note that each method has its own pros and cons and whatever method one uses in share market the gain is always unpredictable so one should be cautious in using these tools. For example in trailing stop-loss order if the share rises fast but decreases significantly in between before again rising then the sell order would be executed and it would be sold as soon as it reaches within that predefined percentage. In simple stop-loss order it would not happen. We must also remember that tools are designed for minimising losses and there is no tool which can avoid losses. One has to be very prudent in share market dealings especially when using these advanced tools.

    Knowledge is power.

  • On line, brokers devise the ways to limit investors losses with their constant vigilance on the trend. One of the most downside protection would be to exit strategy known as stop loss order where in share prices dips to a certain level giving brokers the opportunities to sell the shares at the current market price to plug the further losses.
    Traders can improve the efficacy of a stop loss by pairing it with a trailing stop, which can be a trade order. Stop loss price does not indicate the fixed dollar amount below the market price.
    Working Mechanism -
    When the price is on the upward trend, it will drag the trailing stop along with it when the price ultimately stops rising . The new stop loss price would remain at the level at which it was dragged to thereby protecting an investor for the further down slide.
    Trailing stock is used with stock options and future exchanges stop losses order.
    How to use the trailing stop/ stop loss combo on active trades-
    Trailing stops are difficult to be amalgamated with the active trades because of the price fluctuations and volatility of certain stocks especially this is more pronounced in the first hour of trading.
    Traders are more attracted towards the fast moving stocks because of their potentials to generate substantial amount of money within a short span of time.
    Trader's Risk -
    Traders are susceptible to certain risks while using stop losses. For a starter, market operators are keenly aware of stop losses and so is the case with the brokers, who very often manipulate the prices thereby bumping you out of position and then the running price would approach to the normal level.


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