Tuesday, 1 August 2017


Many investors struggle with the task of determining where to set their stop loss levels. Investors don’t want to set their stop loss levels too far away and lose too much money if the stock moves in the wrong direction. On the other hand, investors don’t want to set their stop loss levels too close and lose money by being taken out of their trades too early.
So where should you set your stop losses?
Let’s take a look at the following three methods you can use to determine where to set your stop losses:
         The percentage method
         The support method
         The moving average method
The Percentage Method 

The percentage method for setting stop losses is one of the most popular methods investors use in their portfolios. trough using this method is determine the percentage of the stock price you are willing to give up before you exit your trade. For instance, if you decide you are comfortable with a stock losing 10 percent of its value before you get out.
The Support Method 
The support method for setting stop losses is slightly more difficult to implement than the percentage method, but it also allows you to tailor your stop loss level to the stock you are trading. To use this method, There are two primary methods for finding stop-loss points using price action.
                           Ideally, we want the market to stay away from our stop-loss point. Hence, for long trading setups, using support levels as stop-losses is logical. The same goes for using resistance levels to set stop-losses for short trading setups.
The Moving Average Method 

In this method, you need to apply a moving average to your stock chart. Typically, you will want to use a longer-term moving average as opposed to a shorter-term moving average to avoid setting your stop loss too close to the price of the stock and getting whipped out of your trade too early. Once you have inserted the moving average, all you have to do is set your stop loss just below the level of the moving average.