Managing stop loss
A stop-loss order means that you give instructions via your trading platform that the system should automatically sell your asset when the price drops to or below a pre-specified level.
How to calculate?
Imagine you bought an Apple share for USD 140 and you want to set up a 10% stop loss. 10% here means that you do not want to lose more than 10% from your invested money (140).
10% of USD 140 is 14, so you do not want to lose more than 14 dollars.
This means that you have to sell your Apple share at USD 126 (=140-14) if the share price starts to fall.
How to set up?
Setting up a stop-loss means that you insert an order via your trading platform after you bought the share (or at the same time). Here you define that if the share price of Apple touches USD 126, you want to sell it. The system will execute the transaction automatically, so you do not need to check the share price in every five minutes.
On Saxo Bank’s platform:
Good to know
If the market falls, there is no guarantee that the system can sell the share at the specified stop loss price (in the prior example 126), since the USD 126 price triggers the execution but the price in the next second can already be lower. So if you want to have a higher chance of not losing more than 10%, you should insert the stop loss price a bit above your desired selling price. I.e. if you wish to sell at 126, then insert 126,1.