What is stop loss? What are the stop loss techniques?

Stop loss is also called "cutting the meat", which means that when the loss of a certain investment reaches a predetermined amount, the position is liquidated in time to avoid larger losses. The purpose of stop loss is to limit losses to a smaller range when investment mistakes occur.

The role of stop loss Suppose a crocodile bites your foot. If you try to break free of your foot with your hands, the crocodile will bite your foot and hand at the same time. The more you struggle, the more you get bitten. So, if the crocodile bites your foot, your only chance is to sacrifice one foot. In the stock market, the crocodile rule is: when you find that your transaction deviates from the direction of the market, you must stop the loss immediately without any delay or any luck. It sounds too cruel for a crocodile to eat people, but the stock market is actually a cruel place, and people are swallowed up by it or disappear sadly every day. This is the role of stop loss. An important difference between stock investment and gambling is that the former can limit losses within a certain range through stop loss, and at the same time maximize the rewards for success. In other words, stop loss makes it possible to gain greater benefits at a smaller cost. possible. The countless bloody facts in the stock market show that an unexpected investment mistake can be fatal, but stop loss can help investors avoid danger. The stop loss point is the loss range set by investors based on the risk they can bear. In the process of stock trading, in order to reduce losses as much as possible, the lowest price at which the stock must be sold is artificially set. For example, 90 of the buying price is used as the stop loss point, that is, if you buy for 10 yuan, the stock price starts to fall, and you must sell when it reaches 9 yuan.

What are the stop loss techniques? One of the stop-loss methods: Technical stop-loss method. It combines stop-loss setting with technical analysis. After eliminating random fluctuations in the market, stop-loss orders are set at key technical positions to avoid further expansion of losses. This method requires investors to have strong technical analysis capabilities and self-control. The technical stop loss method has higher requirements for investors, and it is difficult to find a fixed pattern. Stop loss method two: fixed stop loss method. This is the simplest stop loss method. It refers to setting the loss amount to a fixed ratio, and closing the position in time once the loss is greater than this ratio. It is generally applicable to two types of investors: one is investors who have just entered the market; the other is investors in riskier markets (such as futures markets). The mandatory effect of fixed stop loss is relatively obvious, and investors do not need to rely too much on judgment of the market. The setting of stop loss ratio is the key to fixed stop loss. The ratio of fixed stop loss consists of two data: First, the maximum loss that investors can bear. This ratio varies depending on investor mentality, financial affordability, etc., and is also related to investors' profit expectations. The second is the random fluctuation of trading varieties. This refers to the disorderly price fluctuations caused by the behavior of market trading groups when there are no external factors. The setting of the fixed stop loss ratio is to find a balance point between these two data. This is a dynamic process and investors should set this ratio based on experience. Once the stop loss ratio is set, investors can avoid being shaken out by unnecessary random fluctuations. The third stop-loss method: Spatial stop-loss method. When the invested stock has made a profit, due to factors such as the stock price rising pattern is intact or the theme has not been exhausted, investors believe that there is still power to rise, so they continue to hold shares and wait for the stock price. Sell ??when it falls back to 5 to 10 times less than the maximum profit. This method is to stop losses based on the reduction of profit margins. In fact, it is also one of the methods to stop profits. Its purpose is also to reduce losses, but it is just to reduce the loss of the profit part. The fourth stop loss method: Unconditional stop loss method: Stop loss that runs away regardless of cost is called unconditional stop loss. When there is a fundamental turning point in the fundamentals of the market, investors should abandon any illusions and rush out regardless of the cost in order to preserve their strength and choose the opportunity to fight again. Changes in fundamentals are often difficult to reverse. When fundamentals deteriorate, investors should act decisively and close their positions.