theworldaccordingtochris

what is a stop-loss?

i’m glad you asked. a stop-loss is set so at a certain price so that if your stock drops in values, you will automatically sell at a loss at the stop-loss price to prevent you from losing more.

for example:

buy at $20, set your stop at $18. if the stock hits $18, you sell automatically but be careful because if the price moves after hours, for example if it gaps down to $17, you’ll get sold for 17. it’s not gaurantee that you get 18

take for example xilinx:

bullish flags are good, but they are not 100%. you should wait for it to break out of the flag. usually they break to the north, but for xilinx, this will be hard because north of the bullish flag there are huge amounts of resistance. on that chart xlnx was at this range for a LONG time. it means that the price has had support for a while. it’s hard to bust through

also the 30 and 50 day moving average is there too. stock prices usually bounce off their DMA (daily moving averages). i use the 50, 100, 200 DMA. this guy uses 30,50,90. the 50 DMA is also on the top side. so xilinx has to bust through the 50DMA and also the price support from november to december. if it can do that, then it’s clear sailing.

i disagree with this guy however. why risk buying xilinx now? there is too much risk. listen to the markets. wait for it to break the 50DMA, the flag, and price supports at 22.5. if it gets above that, then buy and set your stop at 22.5. that way the most you can lose is a few cents. if you buy here and set your stop at 18.25 that’s like a BIG loss if you’re wrong. limit your risk.

you can be right 30% of the time and still make money if you limit your risk and let the winners run free.