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Day Trading

Importance of Stop Loss

Investment Stop loss means cut your loss, cut looser and let winner run.

As per demand and supply theory when supply and demand becomes imbalance there is a big price movement, and if supply is more then demand price come down, and when demand is higher then supply then price goes higher.

As a best practice we are buying in demand zone means at strong resistance. Suppose that resistance broke,
what it means? Here supply increase then demand that the reason stock price broke strong resistance. As per demand and supply theory now stock price goes more down, and if you don’t have stop loss what happen? You loose more money. That is the reason stop loss is very important to protect your money.

What is a best stop loss point? Majority people have this question, but my answer is very simple, buy only when stock comes in demand zone and sell when it hit supply zone, and keep the lower point of demand zone as a stop loss for long position. Because once stock cross below the demand zone, it means any reason supply is higher then demand, that indicating stock price ready to go more down. If knows stock price ready to go more down then there is no reason to hold that stock or securities. Stop loss is a key for successful trading, investing or even day trading.

Especially when we buying any stock that has higher beta, in that case you can’t avoid stop loss, without stop loss you can loose all amount of money. I am looking like we drive car without break if we not consider stop loss.

Now you know why stop loss is important in your trading strategy. You don't want to loose more money or stuck. You need to decide your stop loss point before to buy.

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