A “stop-loss” order provides some peace of mind that is essential for any trader and will allow people to eliminate the “stress” factor that is too often related to day trading. It is up to you to use it and do so effectively. Rockwell Trading Services can provide knowledgeable information concerning stop-losses and other valuable terms.
Example of a stop-loss order
Suppose a person just purchased 500 shares of INTEL for $48. Their only priority in the seconds that follow the purchase order will then be the availability to enter a “sell 500 INTEL at trigger threshold $47.3” (for example). As soon as this order is entered, they will be able to relax knowing that, in a worst-case scenario, he or she will lose on this trade a maximum of about $0.70 (1.4%), which is according to the “slippage”.
Most of the capital will be protected and this is one of the main rules of survival in the trading world. Without the application of this rule, any progress will be impossible or doomed to fail at some point.
Closing is a must-do every single day
The second most important rule of day trading: people must always close each position before the end of the day! Here’s why. The second rule states that a person must close any open position before the market closes, and on the same day the position was opened. There is NO EXCEPTION to this rule and, whenever a person decides to override it, they will incur enormous risks to their capital.
He or she will give “de facto” control of their money to elements that are totally external, all of which will be uncontrollable. What is the justification for this rule? Plainly put, it allows you to totally control a number of your losses on each position, within the same day and during the same trading session.
On the other hand, once you decide to keep a position up to one second after the closing of a trading session, you will then expose your capital to various risks that can occur overnight. Unnecessary risks should never be taken when day trading.