बुधवार, ३ एप्रिल, २०१९
गुरुवार, १३ डिसेंबर, २०१८
शनिवार, २४ नोव्हेंबर, २०१८
Stop Loss: Limit Losses On The Stock Market |Stop Loss Characteristics
What can be done to avoid that the stock market drop in value can take much of the savings invested? The small and medium investors have mechanisms that can help them in their investment strategy to solve this type of problems and, thus, avoid that the fall of a value or the downward current of the same leads to a drain of losses that may reach 20% and 30% of the capital invested and even above these percentages in bearish periods. One of them is the 'stop-loss' orders, which can help investors that the losses that could arise from the investment in equities are not high enough to ballast the investment made.
Conditioned orders
A 'stop-loss' order is an order to buy or sell shares whose delivery is subject to compliance with a condition in the price set by the user. When this is fulfilled, a limited order is sent to the market at a price that has also been reported. Thus, for example, when certain securities are purchased, at the same time they can be ordered to sell automatically if their price falls above 5%. The activation condition may be "greater or equal" or "less or equal" at a price.
The main advantage of this option is, in the opinion of Bankinter's broker department, to be able to ensure the investment since it allows the introduction of 'stop' sales orders on a purchase, depending on the expected return on investment and the maximum loss that would be willing to assume. In short, this tool helps limit the losses derived from it. In this way, the user ensures a maximum of losses, avoiding greater evils in case the stock continues to fall. It is a method recommended by most equity analysts, although others consider that this system can weigh a greater profit.
In any case, it is a service available to all financial institutions and can be processed in branches, by phone or through the Internet, which is the most appropriate channel for this type of operations due to its speed. On the contrary, it has the disadvantage of being somewhat complex for those who are not used to its mechanism, so it is advisable to ask the financial institution with which to operate a manual of basic instructions to operate properly.
The 'stop loss' orders have a series of characteristics:
·
The financial institution will respond to requests for the withdrawal of stop orders, as long as the status of the order allows it.
· A stop order cannot be modified. In this case, the order must be canceled and a new one processed with the new conditions.
· It is not possible to send a stop order "to the market" or "limited to the best price". It is necessary, therefore, to inform a limit price.
· The trading of stop loss orders is available for securities and warrants quoted in the continuous market, as well as for the securities that make up the main international indexes.
· The deductions derived from a stop order will not be made, as in the case of a normal order, when it is registered, but when the activation condition is fulfilled and sent to the market. This is the reason that allows the investor to register more than one stop sale order on a single purchase.
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