Investment Updates
Three Ways You Can Play Good Stock Market Defense
Published Tuesday, December 22, 2015 at: 7:00 AM EST
Sometimes, even for stock traders, the best offense is a good defense. For instance, a "stop order" can be a useful way to slam the brakes on potential losses, especially when the stock market is showing volatility. However, a stop order isn't foolproof. It also could trigger a loss greater than you expected or close the door on future appreciation.
There are three basic types of stop orders: regular stop orders, stop-limit orders, and trailing stop orders.
1. Regular stop orders. A basic stop order works pretty much the way the term implies. All you do is specify a price at which you would want to sell a stock if the price is falling. If the stock never reaches that point, nothing happens and you continue to hold the stock until you otherwise choose to sell it. If the selling point is reached, an order is placed to sell the stock at the next best available price.
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