A stop on a stock you are long on is placed below the purchase price.A stop on a stock you are short on is placed above the sell (short) price.The purpose of stops is to protect your money. If you bought XRA at $8.80 a stop placed at $8.10 would sell the stock if it falls to $8.10. This is a 8% stop excluding commissions and fees. What I do for a long purchase (most of the time) is set a stop at 8%. If the stock moves up, I move the stop up (a trailing stop). As the stock moves up, the amount betwen the stock price and stop price widens from 8% to what ever I feel is correct.Stops are one of the most important tools to use. Preserve capital.A sell limit is placed above the purchase price. I cant set a sell limit and a stop at my broker, so I would set the stop.I do, at times, not use stops.
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