Why Use Stops

Stop orders allow you to cut your losses short as well as use proper risk managements. So besides the fact that stocks can fall fast, what other reasons are there for you to use stop orders?

1. It allows to manage risk

When you place a stop order on a stock what you are doing is telling your broker if my stock falls to this point or lower cut my losses short and get me out of the trade. This allows you to cut your losses and get out of a stock at the first sign of weakness.

It is a much better way of doing thing then just holding onto the position and letting your stock fall 50% or more.

2. It allows you to position size

If you use stop orders you already know how much you are risking on each trade. This way you can manage your risk so that if you are wrong it is only a small portion of your account.

3. Peace of Mind

The markets are less stressful when you have stop orders in place and you know how much you can lose. This is especially true when the markets are crashing. Instead of being one of those people glued to the computer wondering how far stocks are going down, you can be living your life knowing that you can only lose a small percentage of your account when the markets turn against you.

4. It helps you play the downside

Shorting stocks is a great way to profit from the market as it is going down. Instead of crying about a falling market you can be one of the people profiting from it. After all crashes happen, would you rather be losing money when they do or making money?

The thing about playing the downside is that moves happen so fast, if you want to make good money from it, you need to have stops in place for when the markets do start going up.

For more on stop Orders visit http://www.stocks-simplified.com/stop_order.html

For some stock market tips visit http://www.stocks-simplified.com/stock_tips.hmtln