Every investor has their own way of generating profits from the stock market. Some like to use stop losses to protect their capital, whilst others like to stay in stocks for several years and therefore try and avoid using stop losses. The fact is that there are pros and Tadalis SX cons of using a stop loss.

The pros are fairly obvious. When you invest in any given stock you can set a stop loss at a certain amount away from the original purchase price. So for example you could set your stop loss 5, 10, 15 or 20% below the current share price. That way you know that you can only lose a certain amount of capital if an investment doesn’t turn out as planned (although sometimes the share price can of course plunge well below your stop loss resulting in higher losses than you had anticipated).

So the major benefit is that you can use them to protect your capital. It’s also worth bearing in mind that if you take losses early, you always have the option of buying back in again if the share price looks like bottoming out, or starts to turn upwards again.

The major drawback of using a stop loss is that you can be taken out of solid long-term investments by short-term volatility in the markets. In this current climate it’s not uncommon to see wild price swings in even the largest most actively traded shares. So the last thing you want is to be taken out, only to see the share price bounce back to where it was a few days later, or even a few hours later in some cases.

I personally believe that there is an argument for not using a stop loss, but only if you are investing in ultra strong companies that are growing their earnings or dividends year on year, and are likely to continue doing so. In general though you should always have a stop loss in mind, even if it’s just a mental one because the markets can fall rapidly taking even the strongest companies down with them.

I myself like to use a stop loss 20% below my entry price. This very rarely gets hit because I tend to invest in quality companies that are oversold in the short-term. However if the share price does fall this much, there is usually something amiss with the company and it’s usually best to take the loss. In most cases the price will continue falling and if it doesn’t you can always jump back on board or wait until there are clear signs that a bottom has been Kamagra jelly reached.

So in summary I would say that it’s always a good idea to use stop losses to protect your money. However I would always recommend using a mental stop loss so that you can make the final decision whether to actually bank the loss because sometimes the price may fall as a result of short-term volatility in the markets.

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Category: Finance/Investing
Keywords: investing,long term investing,investing tips,trading,stock market,shares,stocks,share trading