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This is actually the way many traders I know work - and they do it through stop loses and position sizes relative to those stop loses. So, if they are willing
by inthewoods 14y ago
This is actually the way many traders I know work - and they do it through stop loses and position sizes relative to those stop loses. So, if they are willing to lose $1000 on a trade and their stop is $10, then they can buy 100 shares. That way they've built the max lose they want to take into the trade.
- arjn 14y agoBut are stop-loss positions guaranteed to be triggered ? What if there are no buyers in a plunging market ?
- inthewoods 14y agoNo - but this demonstrates the mind-state of a full-time trader. Full-time traders also build that into their mindset, along with the idea of long-tail events.
- TDL 14y agoA stop loss is basically the point where a trader will dump their stock (most traders don't even maintain stop-loss orders since they are often times hunted by more sophisticated players.) It is a clear marker where the trader is wrong & the trader will recognize the loss, preserve capital, & wait for the next setup. So if the stop is @ $10 & the only offer is not until $9.75, a trader should take the loss @ $9.75 in order to avoid an even deeper loss. A stop loss is merely one mechanism in a traders risk management strategy. [Minor edits]