STOP
The stop, which is one of the important stages of investment, making short-term trading, shows the point at which we can bear the loss.
When you open a position with 10 000 TL, how much loss is your acceptance from this position? 300 TL? 500 TL? 1000 TL?
There are different methods used to stop;
- You can put it in currency form. With straight logic, I put 800 TL stop on my 15,000 TL buy position, like if I lose 800 TL, I will exit the position.
- you can put it as a percentage. I am willing to 10% loss. I am willing to lose 2000 tl against the buy position of 20 000 tl. I can get out of the position with a loss of 2000 TL.
- A stop can be set based on the volatility seen in the market. In this regard, help can be obtained from the indicators that show the market volatility. For example, if the stock price is 1.50 and the volatility seen in the market is 0.12, I will close my buying position in the price fluctuation of 0.12.
-Selling when the price drops below the lowest price the day before. Yesterday's lowest price 1.28 is 1.32 now, if the price drops below 1.28, I would sell.
- Taking the average of the lowest prices seen in the last 5 days and selling if the prices fall below this level.
Here, your potential to accept the risk and the dynamics of the instrument you invest in are important.
After determining the purchase point in both short-term trade and long-term investment, the second stage is the stop level. It doesn't matter what market you are investing in, whether fx, stocks or viop.
The selling point is more important than the buying point in the transaction that will save you money when the position is opened. We will examine this in detail later.
What is the benefit of stob?
-Stop shows you something is wrong. Why stay in position if something is wrong?
- It allows you to get out of the position you have taken with less damage. The market is not going anywhere. If the dynamics change, you will get it again.
-The most important part of the trading strategy you have established is the stop. Because the stop shows you the risk you are taking.
When you enter the market, you need to avoid losses as much as possible in order to increase your capital steadily.
nobody can make money without losing money. This is contrary to the nature, functioning and logic of the system. Then what you need to do will be to determine your loss level beforehand.
An investor who does not set a stop and does not sell when the price falls to the stock will be withdrawn from the investment area, taking a bad hit one day.
You need to check the success level by trying the stop method you will apply in the past.
The stop you put should be at a distance that will not throw you out of the market in the normal fluctuation of the market, but in a way that does not cause great losses.
Human nature does not want to harm. While prices are falling, your loss will grow on the screen from moment to moment and this will start to disturb you after a certain point. You are hurting. You are defeated. You are losing money. Your purchase decision turned out to be wrong. In this case, your hand will not be able to go to the sell button.
But there is a truth. Why would you do more harm? It is easy to determine the stob, but it is really difficult to sell at the stop. I usually recommend the following. Before buying large quantities, familiarize yourself with the stout. Buy less but buy stoba thought. Make a habit.
Putting a stop is like getting a car you bought for 70 000 TL and having insurance for 2000 TL. Or it is similar to making earthquake insurance for the house you bought. Nobody says we did not have an accident this time, when the insurance period expires.
Stop is like removing a gangrenous hand from the body. This is just as true for an investor investing in the stock market as much as it is true that this is happening medically.
Well, what will happen if it comes back soon after I buy it,
If it comes out soon, you will get it again. Why did you buy the stock you were considering buying? my basic data was intact, it was breaking my resistance, my support had come. Why you won't buy the stock you trust. The aim of the stop is to prevent you from further damaging when an unexpected situation occurs.
There are many who lose their capital by not putting a stop, but there is no one who stops and melts their capital by abiding by the stocks. Not every buy position you open will result in a loss.
AUTHOR:
Ali Erkan TANACIOĞLU
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The ratings contained herein are based on comments and personal opinions. These views may not be suitable for your financial situation and risk and return preferences.
Therefore, making an investment decision based solely on the information contained herein may not produce results in line with your expectations. "