The amount you should set your stop loss for any stock depends
on a number of factors, including your risk tolerance, the volatility of the
stock, and your investment goals.
Here are some general
tips for setting stop losses :
·
Consider your risk tolerance : How much money are you
willing to lose on a given investment? If you have a low risk tolerance, you
may want to set your stop loss closer to your entry price. If you have a higher
risk tolerance, you may be willing to set your stop loss further away.
·
Consider the volatility of the stock : Some stocks are more
volatile than others, meaning that their prices can fluctuate more wildly. If
you are investing in a volatile stock, you may want to set your stop loss
closer to your entry price to limit your losses.
·
Consider your investment goals : Are you investing for the
short term or the long term? If you are investing for the short term, you may
want to set your stop loss closer to your entry price to protect your profits.
If you are investing for the long term, you may be willing to set your stop
loss further away to give the stock time to recover from any short-term
setbacks.
A common rule of thumb is
to set your stop loss at 10% below your entry price. However, this is just a
general guideline and the best stop loss level for you will vary depending on
your individual circumstances.
Here are some examples of
how to set stop losses for different types of investors:
·
A conservative investor might set their stop loss at 5%
below their entry price.
·
A moderate investor might set their stop loss at 10% below
their entry price.
·
An aggressive investor might set their stop loss at 15% or
even 20% below their entry price.
It is important to note
that no stop loss is perfect. There is always the possibility that the stock
will fall below your stop loss level before it has a chance to rebound.
However, using stop losses can help to limit your losses and protect your
capital.
It is also important to
review your stop loss levels on a regular basis and make adjustments as needed.
For example, if you have set a stop loss at 10% below your entry price and the
stock has risen by 20%, you may want to raise your stop loss to 10% below the
current market price. This will help to protect your profits if the stock
should start to fall.