What are the pros and cons of stops?
This post has had a lot of interest from other tradesmen, so I’ve decided to write a summary of some of the most popular stops currently found in trades of all sizes and shapes on the site.
Proper stops are not cheap, but when done correctly they can increase your odds of beating the market. The key is to make these trades with the best outcome at the lowest price, and the following are the best options found.
1. Stop Loss with Stop Demand
Stop loss is usually the first stop taken when you come across a trade or opportunity that has gone below the target price. When the price of a stock has dropped dramatically, it might seem like the stock is out of your range – but the stock could really be at risk if they were to get above the target price.
If the stock does turn out to be overvalued, stop loss can be put on the stock for the full loss or if the market is under-priced.
Proper stop demand usually uses stop loss – which means you stop the trade when:
The stock is close enough together that a stop loss is called on the stock
The stock is below the target price – so a stop lose is called on the stock
If this sounds too difficult for most traders to understand, then don’t worry, this post will show you the pros and cons of stop demand in action – so if you’re not sure about whether a stock is overvalued or under valued just follow the steps and you will know the answers.
A stop demand stop is best put on the price of a buy at 0.00% and an sell at 0.01%. For example – an investor with $50 million, who is willing to be paid $30 million over the term of the contract, requires a 0.00% stop at the beginning of the contract period (beginning to end) and a 0.01% stop at the end. In this example, the investor requires a stop loss of $35,000.
So, how does it work? To explain properly – it’s simple really. You put the price of a stock at (0.00% + 0.01%, 0.00% + 0.00%) – which is the price you are willing to accept for paying the investor $35,000 in cash. They then sell the stock and demand a $30,000 stop fee – which will be calculated to be
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