Whenever you execute a buy-to-open trade always be cognizant of the potential PROFIT
and LOSS.
THE BEST TECHNIQUE To PROTECT PROFITS as well GUARDING A POSSIBLE LOSS, it is crucial to immediately enter a stop loss order.
At the same time you can further protect the profits by combining with a trailing stop loss order. The best approach is the stop loss is set slightly below the current stock price at about 2.5% with a trailing stop at 3.0% below the current stock price.
The trailing stop loss order can be either a percent or cash value.
Check with your stock brokerage firm for their procedures to enter the trailing stop order.
The trailing stop order should be entered as soon as possible after the buy order was executed, but NOT before the crucial STOP LOSS order.
The trailing stop order can be a ‘LIMIT ORDER’ by either calculating the limit price via
a percentage or a cash amount. If you do not enter it as a LIMIT by default your broker
will execute as a MARKET order
Rarely place a sell at ‘MARKET’, use the ‘MARKET’ order if you feel or know the price
is profitable, not wanting to wait if it will continue to be favorable. Perhaps taking
smaller profit via a MARKET order than a limit order, but a profit is a profit. With this
or any profit you can be more comfortable with another trade.
Always order an alert to inform you of the potential loss.
Be certain about your qualifications with your broker, such as being a ‘Day Trader’,
having ‘options trading privileges’, as wall as a ‘Margin Account’.
Is a Margin Account necessary to invest and or trade stocks etc.
No it is not but it is a good idea to have a Margin Account.
To understand margin accounts do an internet search with these links and search terms;
‘cost for a stock margin account’
‘what is a margin account for stocks’
‘restricted control or margin account stocks’
Direct links to other important explanations
SEC.gov | Investor Bulletin: Understanding Margin Accounts
https://www.investopedia.com/terms/m/marginaccount.asp
https://www.finra.org/rules-guidance/key-topics/margin-accounts
Please note links and search terms are extensive we have selected just a few we believe
will reinforce your knowledge.
If you haven’t taken a tour of the site please do.