How to cut your risks using stop-loss orders
I've thoroughly tested Trade Nation 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 Trade Nation
Are you concerned that a stock you own drops steeply while you're away on holiday, leaving you with a big loss? Or that youn'l cling too long to a once-cherished stock that slowly declines, never to recover? If you donn' want to lose sleep over such scenarios, itn' a good idea to set up a stop-loss order.
What is a stop-loss order?
A stop-loss order triggers the sale of your holdings of a stock if the stock price falls below the level you specified. The sale is an automatic process that requires no action from you, and serves to potentially protect you from unexpected or excessive loss if youn'e the kind of long-term investor that doesnn' want to check market movements regularly.
If youn'e a buy-and-hold investor, you should keep in mind that stocks that rise over the long term can still fall in the short term. To make sure you don't trigger the knee-jerk sale of an otherwise healthy stock, itn' a good idea to set your stop-loss price levels at a safe distance below the current market price.
See below if stop-loss orders - or other order types that let you fine-tune the price at which you buy or sell stocks - are available at Trade Nation.
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 Trade Nation as of January 2024?
Yes, stop-loss order is available at Trade Nation's web, mobile and desktop trading platforms.
At Trade Nation the following order types are available: Market, Limit, Stop-loss, Stop limit, Trailing stop, Guaranteed Stop Loss.
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Data updated on January 24, 2024
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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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