Does an example exist of a stop loss trade saving someone money? Perhaps a company going bankrupt and the stop loss allowed the investor to salvage a bit of money before the stock hit $0? Perhaps there are companies that have massively corrected without recovering and a stop loss wasn't the worst possible trade?
Stop losses are intended to manage risk on your trades. There is a method to calculate where the stop should be placed depending on the amount per trade you are willing to lose if a trade goes against you.
I understand what a stop loss trade is, as evidenced by the first post in this tread. I'd like to know if anyone has ever executed one to their advantage. The idea of selling a stock when it goes down seems counter to the idea of making money.
Your first sentence in your reply says you understand what a stop loss is but your second sentence of selling when it goes down says you don't understand what a stop loss is. The idea of a stop loss is to LIMIT your loss. If you predict a stock is going up and the trend does not play out and starts downtrending the stop loss get's you out and saves you more loss. That is successful. Not sure what else you are trying to get at.
I generally always enter a stop loss along with a buy order. The stop loss is placed under support. The placement/price of the stop-loss has nothing to do with how much I am willing to lose. The stop-loss is determined by chart conditions...it is where I know my assumptions were wrong. Rather, my loss is limited by the price I'm willing to pay or the number of shares I'm willing to buy. I want to buy as close to the stop-loss price as the market will allow. Have stop-losses saved me money? Yes, many times, by keeping losses small. Stop losses have also allowed me to ride winners and lock in profits when the tide turns. It is better when I can watch the screen everyday, but even then I place disaster stop-losses.
I stand corrected, It is the decision of where to place the stop that lets you calculate loss per share so you can calculate the number of shares to buy to stay within your risk tolerance. Point is to keep risk managed.
Stop losses have saved me money as well. I know you are a long-term investor @TomB16, so they would be less relevant to you as you aren't watching the price daily, etc. To a swing trader like myself though that has crazy work hours, I am not able to monitor. If my stop is activated and I exit the trade, sometimes it can go back up and like you said, be counter-intuitive to making money. I find stop losses usually save me money though. Even if that stock rebounds over the course of lets say 3 months, what is more valuable? Getting stopped out and moving on to the next trade for a profit of $500 over a few weeks, or waiting 3 months to make that $500? Sometimes losing a trade early and having that money available for the next opportunity is far more valuable than trying to win EVERY trade at the cost of slower profits and lesser opportunity. Hope that made sense.
