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"Crucial but often overlooked, money management practices can mean the difference between winning and losing in the market.-Placing Stop Order- It’s helpful to think of these by their more formal name, stop-loss orders, because that is what they are designed to do – stop the loss of money. Stop orders are offsetting orders placed away from the market to liquidate losing positions before they become unsustainable.
Placing stop orders is more of an art than a science, but adhering to money management rules can optimize their effectiveness. Stops can be placed using a number of different approaches; by determining the exact dollar amount a trader wishes to risk on a single trade; as a percentage of total equity; or by applying technical indicators..."
Revisit the Trader's Toolbox Post: "Money Management Part 3 of 4" here.
3 thoughts on “Traders Toolbox: Money Management Part 3 of 4”
Talk about useless market chatter and "noise!"
I have found out of the money puts to be superior to stop losses. They don't get triggered and can more than compensate for any loss if bought in large enough quantity. They can make a loss into a profit however they do reduce the gain if the stock continues up. Same old problem; do you want maximum gain at the expense of risk or an assured smaller gain.
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