Stock market enthusiast: consider these types of transactions

Stop-loss, stop-limit and trailing stop orders can help you stop constantly logging and obsessing over your investments in a turbulent market.

TEXAS, USA – It seems that when the stock market goes upside down, sideways and upside down, the experts say if you’re in it for the long haul, leave it alone. And they are right.

Over time, the market has steadily increased. But after a recent steep drop, a former financial adviser said something different.

The adviser said you might want to consider selling some of your stock, but it’s important to at least determine now how willing you are to drop a stock before it hurts you. ‘easy.

So it’s a good start for a new year-long report series called “Right on the Money: How 2 in ’22,” where the WFAA will share “how to” information on a variety of topics related to the money.

The stock market is always on a rollercoaster ride, but lately the thrills have been particularly wild, with some dizzying falls.

RELATED: Stocks tumble after Federal Reserve signals rate hike ‘soon’

If you’re a hobbyist investor and constantly log into your account to figure out what to do with your stocks, especially on down days, it might be a good idea to consider the types of trades you’ve made.

Have you limited yourself to market orders? Maybe you usually select this when asked what kind of stock order you want to make. In some cases, “market order” may be automatically selected by default. This type of order will generally be executed immediately after a transaction is confirmed.

Stop-loss orders

If you’ve bought stocks and constantly worry about them falling before you need to step in and place a market order to sell those stocks, a stop loss order can be a useful tool.

This type of order allows you to decide how much pain you are willing to take before choosing to dump your position in an action.

Let’s say you own a stock valued at $10 each. Will it be okay if it goes down to $9.50 per share? $9.33 per share? Maybe $8.99 per share?

Find the price that might make you say “stop it falling more!” This can be your stop price.

To set this, you can access your brokerage account and choose to sell this stock. You choose the quantity you wish to sell and choose to do so as a stop loss order. You will be prompted to set your stop price (again, this is the lowest price you would like to tolerate before deciding to sell the stock).

Let’s say you set your stop price at $8.99. If the stock falls from $10 to $8.99 or lower, this triggers a sell order for your stock.

But it is not an infallible protection against further losses. Sometimes stocks go into a rapid freefall.

What if the stock plunges from $10 to $5 in a deal instantly?

Even if the auto-sell order for your stock had triggered at $8.99, by the time that order actually executes, the stock may have already plunged to $5, leaving you with more losses. important than expected.

Stop-limit and trailing stop orders

There is also a stop-limit order. This works much like a stop loss order, but also allows you to choose a limit – where you specify that the stock will only be bought or sold at a price you choose (or better).

And there are trailing stop orders. These are stop orders that can continue to adjust as the stock goes up or down.

The Securities and Exchange Commission describes it as follows:

1. You buy XYZ stock at $20 per share.

3. You place a trailing sell order with a trailing stop price $1 below the market price.

4. As long as the price is moving in your favor (i.e. it is rising, because here you are looking to sell it), your trailing stop price will remain $1 below the market price.

5. The price of XYZ peaks at $24 and then starts falling (not in your favor). Your trailing stop price will remain at $23.

6. The shares are sold when XYZ reaches $23, although the execution price may differ by $23.

That and more information about SEC stop-loss, stop-limit, and trailing stop orders can be found here.

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