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Stock Market Quote A lot of people do not know how to place a stop loss order on a trade when they make it. A stop loss order is an order given to the broker that becomes a market order when the stock reaches the price at which it is placed. For example: We will assume that you buy 100 shares of U. S. Steel at 106. You feel that 2 points is enough to risk on the trade And that if it declines to 104 you would sell it out. It is not necessary for you to sit in a broker's office and watch the ticker until Steel declines to 104 and then get up and tell the broker to sell 100 Steel at the market. When you buy the stock simply give your broker an order reading as follows: Sell 100 U. S. Steel at 104 Stop G. T. C. which means "good till cancelled." Now, suppose that Steel declines to 104. When it reaches this price, your broker sells 100 at the market. He may get 104 for it or he may get 103 7/8 or 103 3/4, but you know that when it reaches this price your stock will be sold. A broker can not guarantee to sell your stock at the limit of your stop loss order, but he does sell it immediately at the next best price after your stop loss order price is reached. Suppose that you sell U. S. Steel short at 1o6 instead of buying it, and that you want to protect yourself against loss. You give your broker an order to buy 100 U. S. Steel at 108 stop G. T. C. If it reaches this price, he buys in the stock. If your stop is not reached and the market goes in your favor, you must then cancel your stop loss order when you close out your trade with a profit. You can, of course, give a stop loss order good for one day, one week, or any specified length of time, but the best way to place the order is G. T. C.; then you do not have to worry about it. 3 rd : OVERTRADING - THE GREATEST EVIL Overtrading is the cause of more losses than anything else in Wall Street. The average man does not know how much capital is required to make a success and he buys or sells more than he should. Therefore he is forced to get out of the market when his capital is nearly exhausted and prob ably misses opportunities for making profits. Make up your mind how much loss you can afford before you make a trade and not afterward. Stick to small quantities. Be conservative. Do not over trade, especially at the bottom or top of long moves. Fortunes are lost trying to catch the last 3 to 5 points in extreme moves. Keep cool. Avoid getting overconfident at tops and bottoms. Study your charts carefully and do not allow your judgment to be influenced by hope or fear. Many a trader has started out trading in 10 shares and made a success because he started near top or bottom; then when the market had reached extreme, he began trading in 100-share lots and lost all of his profits and capital too, because he violated the conservative principle which helped him to make a success. stock quote ~ money maker |