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What are stop-loss orders and how to use them?

You are new to online stock trading. You watched some TV shows and decided, why not? With all the bad press about the state of the stock market lately, you are worried about your investment. But who wouldn’t be? Stop-loss orders tie in with another type of order known as a “limit order” – which you should now know about and understand. We at provide stock trading courses to understand stock in a better way and to know the best stocks to buy.

The stock market can be full of uncertainty and surprises. In addition, you may have heard about traders getting into big trouble for holding on to losing stocks for too long. That is why it is important to know how to effectively use stop-loss orders.

A stop-loss order, also referred to as a stop order by the SEC, is an order to sell a security when it reaches a particular price. The “stop” sets a trigger price at which the transaction is automatically executed. A stop-loss can be placed on a long security (you hope it raises in value) or on a short security, (you hope it decreases in value). Stop-loss orders are a way to lock in losses and exit a position quickly and painlessly for the trader. They are like a fire exit – you hope that you will never have to use them, but if you do, there is nothing better!

If you are an investor, or have an interest in the financial marketplaces, stop-loss orders might be familiar to you. They protect your investments against a downturn within a certain time frame. Stop-losses are a great risk management tool because they allow investors to try out new stock and not lose everything if the company goes under. However, they are also a great trading tool because they can be used to lock in profits. We also provide technical analysis courses that can help you to understand stop loss order more.


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