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[sharechat] Stop loss

From: "Tony Haddon" <>
Date: Tue, 29 Feb 2000 16:55:52 +1300

A stop loss is simply a mechanism to protect the traders liquidity...he/she doesn't end up running out of working capital because it's all tied up in stocks "waiting to come right ", which is ok if trading is only  a part time occupation and you're not relying on it for a living wage. A stop loss enables a trader to keep his capital working.
The notion that you only put money you can afford to lose in the market is in my opinion  damaging...sort of a self fulfilling prophesy......I use a  standard rule where I'm prepared to lose only 2% of my total trading capital on a single trade. There are other conventions, usually based on support, resistance , and trendlines, which I also use, but they take 2nd place to the 2% rule. It isn't easy, because no-one likes signing money away, and there are often the cyclical market considerations you mention.
There's my bit Peter..I'm by no means any sort of expert, but I have managed to survive 18 months in the game so far !
Tony Haddon

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