10 Tips on Using Stop Losses Successfully

A stop loss is basically like an insurance policy. It protects you should one of your trades go bad. With a stop loss your position will automatically be sold when the stop reaches a certain point. Using stop losses is a great way to manage your risks. Here are 10 tips that will help you get the most out of using stop loss orders.

Tip #1 – Never Use A Stop Loss To Purchase A Large Amount Of Shares

While stop losses can help you manage your risks, there are simply some situations where they should be avoided. One of those situations is when you are buying a large block of shares. When a large block of shares is purchased it can be very hard to fill that order in a short period of time. As a result the trade can become ineffective.

Tip #2 – Never Use A Stop Loss During Active Trading

If you are the type of trader who sites at the computer and watches trades all day, than there no need to use stop loss orders. It serves little purpose since you are right there watching everything that is going on.

Tip #3 – Watch Out For Those Hidden Fees

Every stock broker is different and will therefore charge different rates. Look for a broker that uses a flat fee structure as this is the best way to go.

Tip #4 – Never Assume Anything

You should always check your stop loss order to make sure it has been filled. Never assume this has been done. Check all trade confirmations to ensure the stop loss order has indeed been filled in its entirety.

Tip #5 – New Investors Should Always Use Stop Loss Orders

If you are new to the world of investing it is a good idea to use stop loss orders. Doing so will help make trading stocks a lot easier. One of the biggest problems new traders have is letting their emotions rule them. With a stop loss order the emotional aspect is eliminated which will help you make better trading decisions.

Tip #6 – Set Up Profits vs Loss Ratios With Stop Loss Orders

Always knowing your profits vs loss ratios is extremely important if you want to be a successful trader. Stop loss orders can help you keep everything in order so you know exactly what you have at all times.

Tip #7 – Watch Out For Trading Gaps During After Hours

When the stock market closes there can be stock price gaps that occur. When this happens it can cause the stock to keep trading right through your stop loss order. And as you can imagine, this can cause serious problems for investors.

Tip #8 – Set The Trigger Price Using Common Price Increments

When using stop loss orders it is very important that you set a good trigger price. This is by far one of the most important steps in this process. It’s always a good idea to use common price increments such as $30.00 or $75.50. Stay away from increments such as $21.24 or $30.21.

Tip #9 – Pay Attention To The Liquidity Of The Stock

The liquidity of a stock ensures that the trigger price is reached. Use stop losses with stocks that have a high average daily volume. Stocks with a high average daily volume, 100,000 shares or more, decrease the chances that the order will be traded through.

Tip #10 – Give Your Stocks At Least 5% Of Space

If the stock you purchase is trading at $200, your stop loss should be $195 or lower. That way intraday price swings won't cause the order to trigger before it is suppose to.

Stop Losing Money!!! Stay on the right side of the market always with SENTIMENT TRADER - http://sentiment-trader.blogspot.com

10 Ways to Manage Your Online Trading Profits

When you are trading it is very important that you keep a close eye on your profits. Many traders, especially the inexperienced ones, will see their trades go up several points only to fall right back down. This is usually due to poor management of funds. Below I am going to share 10 ways you can manage your online trading profits.

1 - Manage Your Capital

Once you start trading you will notice the markets move extremely fast. That's why it is so important you manage your capital. Be very conservative with your pips. Consider banking only 20 pips at a time. It might sound small but this approach can quickly add up to 200 points.  Doing it this way will help you protect your profits.

2 – Trail Your Stops

I will be honest with you. It takes a lot of effort to trail your stops. But doing so is a great way to retain profits. The first thing you should do is establish a profit target. Sticking with the 20 pips example, once you reach that point you can move your stop to a breakeven point. This way even if it drops and removes your stop, you won't lose anything.

3 – Trade Multiple Lots

Each lot should have a separate target. For instance, if you have two lots you can be conservative with one of those lots. By conservative I mean put it near your entry point of 20 pips. Anything between 15 and 20 pips is good. The second lot can be place further from the entry point. Relocate the stop to a breakeven point as soon as you reach the first target.

4 – Never Trade On Impulse

Impulsive traders let their emotions rule them. They trade based on what they feel and not based on the facts. When you trade on impulse you are basically gambling with your money. You trade recklessly and will eventually lose not only your profits, but your capital as well. So be a logical trader.

5 – Use The 2% Stop Loss Rule

Another great way to mange your profits is to keep your risk at no more than 2%. This is known as the 2% stop loss rule. This rule is a safeguard and will protect you from losing a huge amount of money. Using the 2% stop loss rule you will lose only 2% per trade. With this type of safeguard in place you would have to do a lot of very poor trading to lose all your money.

6 – Understand Analysis & Timing

To be successful in trading you have to understand both analysis and timing. Sometimes you will have to take a modest loss to protect the bulk of your profits. Trust your eyes and be willing to make the necessary moves to manage your profits.

7 – Plan Your Entry & Exit Strategy In Advance

You need to know when you will get in and you need to know when you will get out. This is known as your entry and exit strategy and it should be done in advance. Having a clear stopping point is a great way to manage your profits. The key is to stick with the strategy you have created.

8 – Predetermine Your Risk

Before you enter a trade, take the time to predetermine your risk. Trading is extremely challenging. You can easily lose a ton of money in a matter of seconds. That's why it is so important that you predetermine your risk before you enter a trade.

9 – Focus on Trends

The great thing about trends is that they can last for months at a time. Focusing on trends can help you increase your profits with minimal effort.

10 – Know When to Get Out Of a Trade

You need to know when its time to get out of a trade. If you are clear on something, don't trade it. Follow this rule and you will be able to manage your profits much better.

Stop Losing money!! Stay on the right side of the market always with SENTIMENT TRADER - http://sentiment-trader.blogspot.com