How to cut your risks using stop-loss orders
I've thoroughly tested Plus500 services with our analyst team by opening a real-money account and these are my most important findings:
- Risk management is an important part of investing
- Setting up a stop-loss order is a simple way to control risk
- Stop-loss order is available at Plus500
A common fear among investors is that a stock they own goes into a downward spiral and they fail to get out in time, losing a significant part of their investment. There are certain tools to help you stay on top of this risk - such as price alerts - but if you want a solution that doesn't need your active involvement, you should consider setting a stop-loss order.
What is a stop-loss order?
When using a stop-loss order, you basically instruct your broker to automatically sell some or all of your holdings of a stock if its price falls below a certain level. It acts as a kind of insurance that could help minimize your loss in case of a steep price drop; or keep you from getting stuck too long in an investment that goes into slow but permanent decline.
If you're a long-term investor, remember that temporary declines are perfectly normal for even the best-performing stocks. So make sure not to set your stop-loss orders too conservatively; putting them too close to the current market price may trigger an unnecessary sale, meaning you could miss out on a rebound.
There are other order types such as buy/sell limit orders that can help you remote-control the price at which you buy or sell stocks; read on to see which ones you can use at Plus500.
To find out more, read our in-depth guide to risk management, where we discuss various types of risks, as well as popular broker tools to handle them.
Is stop-loss available at Plus500 as of November 2023?
Yes, stop-loss order is available at Plus500's web and mobile trading platforms.
At Plus500 the following order types are available: Market, Limit, Stop, Trailing stop, Guaranteed stop.
|💰 Plus500 withdrawal fee||$0|
|💰 Plus500 minimum deposit||$100|
|💰 Plus500 inactivity fee||Yes|
|📃 Plus500 deposit methods||Bank transfer, Credit/debit cards, PayPal, Skrill|
|🗺️ Country of regulation||UK, Cyprus, Australia, New Zealand, Singapore, South Africa, Israel, Seychelles, Estonia, United Arab Emirates, Japan|
|🎮 Plus500 demo account||Yes|
Data updated on November 27, 2023
At BrokerChooser, we only publish objective analyses based on live testing. Every recommendation is unbiased and based on first-hand experience: we open a live account anonymously at each broker, deposit real money and test every important feature.
How does a stop-loss order work?
When the price of a stock hits your stop-loss price, your stop-loss order becomes a simple market order, and your broker will attempt to sell your stocks at the prevailing market price. Your order will be fully executed, but some of your stocks may be sold at a price below (or above) the stop-loss price, depending on how the stock price moves after hitting your stop-loss price.
How do I set up a stop-loss order?
It depends on the trading platform you use. Usually, you select the stock and the number of shares you want to sell, then choose “stop” when prompted to pick an order type. Then set the price where you want your order to be activated.
Stop loss vs stop limit - what is the difference?
A stop-loss order instructs your broker to sell a specified number of shares when the stock price reaches your stop-loss price - however, some of your order may be fulfilled at a price different than the stop-loss price. A stop limit order, by contrast, instructs your broker to sell these shares at exactly the stop price - but this means that some of your order may remain unfulfilled if the price keeps moving one way or the other after hitting the stop-loss price.
Are stop-loss orders a good idea?
Generally, stop-loss orders can help limit your losses in case of a steep or unexpected price drop, especially if you don't actively monitor stock prices or use your trading platform often. However, long-term investors should be careful when setting a stop-loss price, so as not to trigger an unnecessary sale during what may be a perfectly normal temporary drop in the share price.
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