Setting Stop Loss Orders – Also Called ‘Stop Market Order’ or ‘Stop Orders’

What is a Stop Loss Order?

An order (instructions to your stock broker or pre-set in most trading platforms) to sell your security once it trades at a set price. If the price never falls to the stop loss, the order will not be executed. Stop loss orders don’t protect you before you make a trade; they protect you AFTER you enter a position.

Setting stop loss orders limit an investor’s loss on a security position, yet too many investors do not know how to determine the price on a stop loss order. Arbitrarily picking a set percentage, anywhere from 5% to 10%, might make sense for asset protection from a money management perspective. However, setting a 7% stop loss order on a stock that historically fluctuates 10% or more during a seven-day trading period is not a realistic strategy. Setting your stop loss orders based upon your risk tolerance is an emotion based decision – not a technical determination for setting stop loss orders.

The stock market becomes an easy medium for making money when using Candlestick signals properly. The stock market is the cumulative knowledge of all investors buying and selling during any particular time. Just like an individual stock, the stock market itself incorporates waves of human emotion. Whenever human emotion is involved with an investment entity, Candlestick pattern formations  visually clarify what those emotions are doing. The stock market can easily be analyzed when applying Candlestick technical  analysis.

Being able to analyze the direction of the stock market greatly enhances the ability to extract profits. The fact that the stock market moves up and down without major changes in fundamental economic conditions from week to week is a clear illustration that fundamentals do not move markets, the perception of fundamentals is what moves markets. Candlestick signals identify what is going on in investor sentiment and makes it possible for setting stop loss orders at logical points.