Always Use Correct Stop-Loss Orders

Don’t ever let your losses run. Always use stop-loss orders! Nearly ALL traders make the mistake of allowing their losses to run, hoping that the market will return in their favor. Most often this will lead to an even bigger loss. Everyone needs to learn how to cut losses, and learn from their mistakes. A good suggestion is to make a habit of determining an acceptable profit target and risk tolerance level before entering any trade. Then simply place a stop-loss order at the appropriate price, but not so close to the market that it could remove you out of the position before the market has an opportunity to move in your favor.

Many people place their stop loss very close at the market open and just before a news announcement. This is setting up for a sure loss. When the market opens on Sunday it can gap causing you to be taken out of the market if you have a stop that is too close to the market. When a news announcement happens the spread can widen and take you out quickly. I have seen people straddle the market with tight stops and have both buy and sell orders taken out with in seconds. You need to learn where to place your stop-loss orders to minimize losses and maximize your profits.