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A stop loss (i.e.
a stop loss order) is used when stock trading to limit the
potential loss should a trader's position go the wrong way
and start to lose money. If you don't bother with stop losses
during stock trading, you won't be stock trading for very
long, as catastrophic events that will wipe out a 'naked'
stock trading position occur with sad regularity - even an
experienced trader needs a stop loss!. A stop loss is basically
a stock trading "insurance policy" to limit your
downside, should your trade be heading the wrong way (which
will happen - no trader gets it right all the time!). Beginning
stock traders should ALWAYS use a real physical stop loss
- only advanced traders should even begin to consider a 'mental'
stop. Where to place a stop is rightly regarded as the most
difficult lesson to learn in stock trading, and is covered
in some detail in our own day trading course. The fact of
the matter is that even if you are only right 50% of the time,
if you have a good stop loss strategy in your stock trading,
you can still make excellent profits. On the other hand, if
you are right 75% of the time but have a poor stop loss strategy,
you can still LOSE money!
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