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Assuming I'm making use of the premarket scan for selecting stocks at the start of the day's trading.
Curious to know how people go about setting stop loss levels.
Initially, I thought that the minimum SL level would be best (2X spread +1) i.e. minimum risk etc.
However, this clearly exposes one to the risk of being stopped out pretty quickly unless the news and indicators are particularly bullish.
So clearly, the difficulty is in getting the balance between risk exposure and potential loss.
I would suppose that setting the SL level depends very much on the stock in question i.e. looking for previous signs of support and resistance on previous days/weeks at which to base decisions on when to get out of a stock should its price reach that level.
Thoughts that come to mind are:
- setting the stop at the opening price on the day or at least a bit below it
- stocks with a larger valuation - e.g. $20.00 - will require a wider level thus limiting potential reward exposure
- closing a position as soon as a decent profit is realised rather than waiting until the end of the day - of course one can open another position on the same stock after the first profit is realised.
Curious to know how people go about setting stop loss levels.
Initially, I thought that the minimum SL level would be best (2X spread +1) i.e. minimum risk etc.
However, this clearly exposes one to the risk of being stopped out pretty quickly unless the news and indicators are particularly bullish.
So clearly, the difficulty is in getting the balance between risk exposure and potential loss.
I would suppose that setting the SL level depends very much on the stock in question i.e. looking for previous signs of support and resistance on previous days/weeks at which to base decisions on when to get out of a stock should its price reach that level.
Thoughts that come to mind are:
- setting the stop at the opening price on the day or at least a bit below it
- stocks with a larger valuation - e.g. $20.00 - will require a wider level thus limiting potential reward exposure
- closing a position as soon as a decent profit is realised rather than waiting until the end of the day - of course one can open another position on the same stock after the first profit is realised.