Hello you very intelligent and pleasant people. I do hope your day is going well so far.
I kindly wanted to ask after your research on a particular stock if you found this was a good fit for your investment criteria, could you set a stop loss say for under 5% of your buying price. I know this is probably thinking more in the short term as stocks sometimes are volatile. However would this be an okay strategy to employ if you was very risk averse and wanted to limit your losses as much as possible please? If anyone could kindly get back to me i would be enormously thankful and grateful.
Hope you enjoy the rest of your day and sending you lots of good wishes. All the very best and thank you for any support you can give.
you could, if you had some reason, specific to that stock, to suggest that 5% would be the right figure
i think the point is that different stocks can have very different volatility habits? so 2% might be enough for one stock while for another 8% might be much more appropriate?
in short, i doubt whether a fixed percentage, without considering the specific stock’s volatility-pattern, would be the optimal approach
please be aware that it’s more than a decade since i traded any individual stocks, so you might want to take my observations with a pinch of salt
good luck!
Setting a stop loss at 5% below your buying price is a common strategy for managing risk and limiting potential losses in the short term. This can be a good approach for investors who are risk averse and want to protect their capital, particularly in volatile markets.
However, it’s important to note that setting a stop loss too close to the current market price can also increase the likelihood of the order being triggered by short-term price fluctuations, known as “stop hunting.” Additionally, setting a stop loss too close to the current market price can limit your potential for gains if the stock price rebounds after a temporary dip.
When setting a stop loss, it’s important to consider the volatility of the stock and the overall market conditions, as well as your own risk tolerance and investment goals. A stop loss should be set at a level that provides enough room for the stock to fluctuate while still protecting your capital.
Ultimately, the best approach to managing risk will depend on your individual investment strategy and goals. It’s important to do your own research and seek professional advice if needed before making any investment decisions.