Posted on Mar 20, 2021

Copy Trading Forum

How to Set a Stop Loss and Take Profit?

Stop loss is designed to limit the loss on stocks that drops in price, it’s like insurance on your investment and is especially useful if you are not watching the stock price or on vacation, it can also be implemented into your stock trading strategy.

A popular risk to reward strategy in swing trading is 1 to 3, so if you invest $100, you set your SL at $90 or 10% and your set your TP at $130 or 30%.

One disadvantage is that a short term drop in price could sell your stock too early.

An advantage of a SL is that it can remove emotional attachment and can make managing your portfolio easier.

A trailing stop loss is a stop loss that you can set to a percentage below the current stock price, not the price you bought the stock at, for an example your $100 investment grows to 120 your 10% stop loss will be set for the current price of $120 so 10% of trailing stop loss would be $12 instead of $10 of an ordinary stop loss.

An active trader may use a lower stop loss of 5% but a long term trader may use a stop loss of 15%.

Take profit is designed to set a price to automatically close the trade or sell the stock when a specific profit/price is gained.

One disadvantage is the TP could be triggered when a stock breakouts in price causing opportunity gain loss.

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