Stop Loss Orders – The #1 Trading Tactic with Penny Stocks
This is the single most important trading tactic of all! If you do this one simple thing, you will be a great investor.
This easy stock market trading technique is more important than just about all of the others strategies out there.
It’s going to protect you from the downside risks, with penny stocks and large stocks alike, while keeping you locked in for any potential gains.
I want to talk to you about stop loss orders. These are absolutely imperative!
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Now, stop losses are the number one trading tactic, and will protect you from the downside in volatile stocks, while keeping your gains locked in.
You should be using stop loss orders always, whether you are trading IBM or Apple or McDonald’s, and especially when it comes to penny stocks. If you aren’t already, you can start using them today!
Here is how it works: If you buy shares, you can set a stop loss just below the price you paid. Maybe 5, 10, or even 15 percent below the purchase price.
Then, if the shares fall lower to your stop loss trigger price at ANY point, for ANY reason, you immediately sell the stock.
So, let’s say you buy IBM at 3. You might set your stop loss trigger price at 9, then if the shares head lower to that point, you immediately sell.
That limits your total worst-case downside risk to about 3%. However, if the shares acted as you hoped and started moving higher, the gains will often be significant.
Usually, your online discount broker will allow you to set automatic stop loss orders, so that you don’t even have to be actively watching the shares. You might buy a stock, set your stop loss trigger price, and theoretically wouldn’t even need to keep an eye on the investment.
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