Stock investment requires mastering three basic skills, namely stock selection skills, stop loss skills, and take profit strategies. But there are still many investors who do not attach enough importance to stop loss and take profit techniques. In the end, they lose because they did not set a stop loss and take profit point, but it is too late to regret it. Today, I will introduce to you the techniques and importance of stop loss!
1、 What is stop loss?
Stop loss refers to the timely elimination of a position in an investment when the loss reaches a predetermined amount, in order to avoid causing greater losses. The purpose is to limit the losses to a smaller range. An important difference between stock investment and gambling is that the former can limit losses within a certain range through stop loss while maximizing successful returns. In other words, stop loss makes it possible to gain greater profits at a lower cost. The countless bloody facts in the stock market indicate that an unexpected investment mistake can be fatal, but stop loss can help investors turn danger into safety.
How important is stop loss? For example, if a stock is priced at 10 yuan per share and drops by 10%, it becomes 9 yuan (10-10 * 10%=9). However, even if the stock price rises again by 10% the next day, it cannot return to the level of 10 yuan, only 9.9 yuan (9.9 * 10%=9.9), and still loses 0.1 yuan. In the stock market, when we find that our trading deviates from the direction of the market, we must immediately stop loss without delay. If one still holds onto luck, it is easy to suffer a complete defeat. In one sentence, it's easy to lose money, but much harder to make it back. So it's important to cut losses in a timely manner and then win back the money through other means.
2、 Why is stop loss so difficult?
1. Afraid that the stock price will turn back as soon as the stop loss is implemented;
2. Sometimes if you don't stop loss, the stock price will really turn around, giving traders a small advantage and a taste of the sweetness. Next time, it will be easier to take chances and refuse to stop loss. This is the biggest trap in the stock market;
3. Encountering the phenomenon of "as soon as the stop loss comes out, the stock price turns back" several times in a row;
4. I still really like the position in my hand, or rather, I'm not sure if the current trend has reversed;
5. The loss limit for the day is approaching, and if the stop loss is reached, the account will be locked and no further trading will be allowed on that day;
6. The stock price changes too much, too quickly, too suddenly, and before it can react, the losses exceed the stop loss level and psychological tolerance;
7. Consider losses as failures.
3、 Basic principle of stop loss:
1. The loss amount reaches 5% of the total funds, and unconditional stop loss is required for any reason or excuse.
2. When the market is not good and the trend is unfavorable to me, stop loss immediately.
3. When I cannot understand the trend and it is unfavorable to me, I will immediately stop the loss.
4. After buying stocks, if expectations are not met, gradually stop losses.
5. Time stop loss, gradually stop loss if there is no market trend for a long time after buying.
3、 Several methods of stop loss:
(1) Initial stop loss method
When investors buy stocks, they should set a stop loss position in advance, such as 3% or 5% below the buying price. The stop loss price for the short to medium term should not exceed 10%, and once the stock price effectively falls below the set stop loss price, they should leave in a timely manner.
(2) Breakeven and stop loss method
In the operation of capital and profit, the capital should be guaranteed first in order to have more profit. Once the stock price rises rapidly after buying, the initial stop loss price should be adjusted immediately, and the stop loss price should be moved up to the breakeven price. This method is very suitable for T O operation and can also be used for T 1 operation.
(3) Dynamic stop loss method
Once the stock price deviates from the breakeven stop loss price and continues to rise, the position of the stop loss price should be continuously pushed upwards. At the same time, the volume price relationship of the market should be observed. If the volume price relationship is normal, then a certain proportion of the stop loss should be set downwards to continue holding. If there is a deviation in the volume price relationship, the trader should be immediately eliminated.
(4) Trend stop loss method
If an effective trend line or moving average is used as a reference indicator in a practical situation, investors should not only observe the operation of the stock price, but also immediately exit the market once the stock price falls below the trend line or average line.
