The first step to protect your downside in the Stock Market is through the use of Sell Stops and sells stop limit orders. It is referred to as “Stop-Loss order”.
Stop-Loss Order is an order to sell a stock when it reaches a certain price. If the share reaches the stop price, the order is then executed and stocks are sold at the market price.
Basically a Stop Limit Order is an order to sell stock ones a specific price is reached, as long as the price does not fall beyond the limit. If that particular share is reached to the stop price, the order is too translated into a limit order.
A Share is said to be “Stopped Out” when a stock falls to the sell stop price. Therefore, sell stop and sell stop limit orders are a good way to keep you on the correct path of stock market. Proper trading tricks should be used. It is suggested to place your order at an odd number because many traders place their stock orders at an odd number with enough place to account for the last potential round of selling.
If in a market position goes down or the position moves against you then the Buy Stop and Buy Limit orders can be used to protect you. They are used to protect the profit or loss on Short Sales. A buy stop limit order is an order to buy a stock once a particular price is reached.
Sell Stop and Sell Stop Limits are a source for protecting out your investments. Sell Stop and Sell Stop limits keep the decision making process simple.
Two common methods to place stop orders are:
Place the stop price below the support level.
To have a bold move, Go back in and place another buy stop to protect your downside of the investment.