Open a FREE Share Trading Account with ZERO Brokerage on Stock Buying and Automatically SellingTraditional brokers charge a lot on brokerage, however this broker does not charge anything for stock buying and moniter-less selling. You can also set a Good Till Cancelled order after buying a stock so that the system can sell the stock automatically at your desired price even if you are not monitoring the market. It takes 5 minutes to open an account online. Click here and Open Free Account with them today >>
Traders trading Intraday should know where to take a stop loss. This article discusses some stop loss methods that you can follow.
Points / Cash Stop Loss Method:
This is the most common method that most Intraday traders use. Basically it is the amount one trader is willing to lose. Let say his total margin blocked is 1 lakh, and he is targeting 2%. This is 2000 profit a day. In that case his stop loss can be anywhere between 1000 or 2000 not more. This way if the trader is successful in 60% of the trades he makes money. This cash can be converted to points also. For example if 1 point is Rs. 2000, then profit can be 1 point and loss can be 0.5 to 1 point.
Average True Range (ATR) Stop Loss Method
Read my post on Average True Range (ATR). It goes into details of the ATR method calculation and how to use it for taking a stop loss.
Day High And Low Stop Loss Method
This is strictly for Intraday traders only. They can take a stop loss if the stock breaches the days low. For this the ideal time to start the trade is at 10 to 11 am so that the days low is clear. For positional trading last 30 days low is a good way to keep the stop loss. However if the last 30 day is way to low and you are not comfortable losing that much money then the Points / Cash Stop Loss Method is a better way to take a stop loss.
Software Indicator Stop Loss Method
This is advanced way to decide a stop loss. This is used by professionals with technical knowledge. These indicators can be moving averages, RSI indicators, stochastics, rate of change, trailing stop method (keep increasing the profits stops as the stock move up and keep booking profits in certain percentage of holdings until all is sold), etc.
Note that trailing stop method can be done for both booking profits and taking a stop loss.
For example a trader buys a stock at 100 and keeps 50% sell as stop loss at 99, if hit he brings the nest stop for rest at 98 – then there is a possibility that stocks bounces back and the trader ends up in profit.
As you can see the trailing stop method to take out profits or losses needs a lot of patience and is possible on big trade positions only.
You Can Read More On My Site
Click to Share this website with your friends on WhatsApp
COPYRIGHT INFRINGEMENT: Any act of copying, reproducing or distributing any content in the site or newsletters, whether wholly or in part, for any purpose without my permission is strictly prohibited and shall be deemed to be copyright infringement.
INCOME DISCLAIMER: Any references in this site of income made by the traders are given to me by them either through Email or WhatsApp as a Thank You message. However, every trade depends on the trader and his level of risk-taking capability, knowledge and experience. Moreover, stock market investments and trading are subject to market risks. Therefore there is no guarantee that everyone will achieve the same or similar results. My aim is to make you a better & disciplined trader with the stock trading and investing education and strategies you get from this website.
DISCLAIMER: I am NOT an Investment Adviser (IA). I am an Authorized Person (AP) of a Stock Broker. I do not give tips or advisory services by SMS, Email, WhatsApp or any other forms of social media. I strictly adhere to the laws of my country. I only offer education for free on finance, risk management & investments in stock markets through the articles on this website. You must consult an authorized Investment Adviser (IA) or do thorough research before investing in any stock or derivative using any strategy given on this website. I am not responsible for any investment decision you take after reading an article on this website. Click here to read the disclaimer in full.