facebookRecently, I learnt about the concept of stop-loss and I am wondering how often do people use it? Do you use it for both investment and trading? - Seedly

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Anonymous

24 Apr 2021

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General Investing

Recently, I learnt about the concept of stop-loss and I am wondering how often do people use it? Do you use it for both investment and trading?

Is it advisable to have stop loss for investment if you are bullish on the stock but wants to limit losses? Would appreciate if you can share some of your experiences and insights on this!

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Tan Choong Hwee

24 Apr 2021

Solutions Specialist at Providend

Stop loss is often used as exit trigger for trading. There are 2 main types:

  1. Initial Stop Loss:

Set immediately after entry to limit losses in the event that the market turn against your position.

  1. Trailing Stop Loss:

After the market moves in your trade direction, you may start to move the stop loss level to breakeven and then move further to secure profits.

Stop loss is for trading

The difference between investing and trading is more of an approach/mindset. Investing is focused on the underlying assets and fundaments that drive the business. Trading is focused of charts and technical analysis. Profits and stop losses are taken mercilessly and pre-defined.

In investing, we want to invest as if we are buying the entire business, doesn't matter what "quotations" other people are offering at this point of time, this is our business we believe in for the long run.

In trading, we don't care about the underlying asset, just making trades based on a set up be it a swing or a trend.

If stock price drops

For Investing, the more it drops, the more I buy.

For trading, once it hits my pre-defined stop-loss, I move on to another trade​​​

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