What is a Trailing Stop Loss?

Trailing stop: Also known as "trailing stop", as the name implies, it is to set a certain point of stop loss following the latest price, which is triggered only when the exchange rate changes in the favorable direction of the position. It is an instruction set when entering the profit phase. . When the position becomes more and more profitable, by increasing the stop loss trigger price, traders can guarantee that most of the book return can still be achieved when the market moves in the opposite direction.

Trailing stop

It means when the loss of an investment reaches a predetermined amount,

First, the crocodile law

Regarding the importance of stop loss, professionals often use the crocodile law to illustrate. The original meaning of the crocodile law is: suppose a crocodile bites your feet. If you try to break your feet with your hands, the crocodile will bite your feet and hands at the same time. The more you struggle, the more you get bitten. So in case the crocodile bites your foot, your only chance is to sacrifice one foot. In the stock market, the crocodile law is: When you find that your transaction deviates from the market direction, you must stop the loss immediately without any delay and no luck. It may sound cruel to eat a crocodile, but the stock market is actually a cruel place. Every day people are swallowed up or disappeared.

Look at a simple set of numbers again: When your fund loses from 100,000 to 90,000, the loss rate is 1 ÷ 10 = 10%, and the profit margin you need to recover from 90,000 to 100,000 is only 1 ÷ 9 = 11.1%. If you make a loss from 100,000 to 75,000 and the loss rate is 25%, you need 33.3% to recover the profit rate. If you lose from 100,000 to 50,000 and the loss rate is 50%, you will need 100% to recover the profit rate. In the market, it is not difficult to find a stock that has fallen by 50%, but to ride and sit down on a dark horse that has risen by 100%, I am afraid that I can only rely on luck. As the saying goes: stay in the green mountains, not afraid of no firewood. The meaning of stop loss is to ensure that you can survive in the market for a long time. Some even say: Stop loss = regeneration.

Reasons for Stop Loss

There are two reasons why stop loss is needed. The first is subjective decision errors. Every investor entering the stock market must acknowledge that he or she can make mistakes at any time, which is a very important idea. The reason behind this is because the stock market is mainly characterized by randomness. The game of tens of millions of people makes it impossible for any fixed law to exist at any time. The only thing that never changes in the stock market is change. Of course, the stock market does have some non-random characteristics in a certain period of time, such as banker manipulation, capital flow, group psychology, and natural cycles. This is the soil for the stock market masters to survive, and it is also constantly attracting more people to join the stock market to maintain the stock market The basis of operation and development, but the operation of these non-random features is certainly not a simple repetition, and can only exist in the sense of probability. If the probability of success is 70%, then there is a 30% probability of failure at the same time. In addition, there must be a time for any rule to fail, and at this time, you may be encountered by smart people. When the probability of failure becomes reality, or the rule fails, it is necessary to swing the knife to stop the loss. The second is objective changes in the situation, such as unexpected unexpected positives or negatives in the fundamentals of a company or industry, major changes in macro policies, wars, coups or terrorist events, earthquakes, floods, and other natural disasters. Break or trader caught, and so on.

Third, retail patents

It is important to point out that stop loss is a retailer's patent. It is impossible for an organization to stop loss because there are too many chips and generally no one can take it. A common method for institutions to deal with decision errors or external events is to take some chips high and sell low to make waves, and then wait for the opportunity to gradually ship. Some retail investors with Zhuang believe that the dealer has not shipped yet, and it is not cost-effective to sit with them to the end, because the operation of the band is almost entirely in the hands of the dealer, it can gradually spread the cost through the band, and you are almost impossible . Therefore, retail investors should give full play to the advantages of their small boat and make a U-turn. When the stop loss is determined, stop it firmly. After the situation improves or the limelight returns, visit the insisting dealer. Maybe you can also receive a generous gift.

4. Learn to go short

The domestic stock market has no short-selling mechanism for the time being and can only go long. If there is a short mechanism, then the long stop loss is mostly short. Because when you stop loss as a long position, there are only two possible predictions for the future, one is consolidation, and the other is decline. Forecast consolidation is to wait and see or buy treasury bonds, while forecasting a decline is to backhand short. Conversely, short positions also need to be stopped, and short stops are often "rebelled" into long positions. Whether you can hold currency and go short, this is the easiest sign to judge whether a person is an investment master. Since May 12, 1997, if you have held an open position for more than half of the time on average, congratulations you have entered the ranks of masters or quasi-masters. Of course, being forced to be inoperable by other things is not counted as such. I believe that the domestic stock market will launch a shorting mechanism or index futures within one or two years. Learning to sell short in advance will be of great benefit. At present, the Minfa community has 180 index futures simulation trading. If you are interested, you may take a try.

Five, good at forgetting

In the stock market to do a good job of stop-loss, we must be good at two forget. The first is to forget the purchase price. No matter what price you buy at, you must forget your buying price immediately after buying, and only decide when to stop loss based on the market itself. Do not let your subjective feelings and emotions affect the objective judgment of the market. The second is to forget the stop price, that is, immediately after making the stop loss, if you haven't fired the ticket, don't be bitten by a snake for ten years, and you will not be afraid of Jing Sheng. When you find a new buy signal on this stock, He did not hesitate to enter again. The Buddha said that impermanence and impermanence are very meaningful to the stock market. At present, a considerable proportion of investors in the market live in a state of depression and anxiety, which is because they have a large historical loss and cannot be forgotten. They always want to move back. I don't know that this mentality is pushing you to a bigger one. Loss. Whether it is a stock stop loss or account management, we must remember this sentence: always stand at zero.

Take Profit and Make Up

If you understand and adhere to the "always stand at zero" concept, then take profit can actually be regarded as a stop loss. There is a saying: You will buy apprentices, and you will sell them as masters. Here, selling will include both stop loss and stop win. In the real market, I often see some friends who are proficient in stop-loss technology and meat-cutting Dafa, proudly claim to be away from trapping, but are not good at winning. They often take elevators, roller coasters, or panic down as soon as the sedan is raised, While watching the sedan chair go up and down the mountain, he scolded himself with his bare feet. The number of shareholders of Changan Automobile was 72,655 at the end of September 2002, and by the end of June 2003, there were only 17,551 people. At least 55,000 people who got off the car midway were even more annoyed than those who had not been on the car. To make a profit, first of all, you must forget the purchase price and decide whether to sell based on the current trend of the market. You are not afraid of entering the cloud on a high road, you can win the cold from a high place, and you are not greedy for a comfortable car. Decided to the ground. Secondly, it is to comprehensively use the various stop loss methods mentioned later to treat stop wins with a stop loss perspective.

There are two situations for margin calls. One is to passively cover positions, that is, to admit that the road is black without fail, which is a shortcut to expand losses. The other is an active margin call, which is generally used when judging that the market has experienced an irrational decline or reached a lower level of reasonable volatility. An active margin call should be a margin call that has not yet reached the stop loss point. Once the stop loss point is reached, it is time to sell. Unstoppable, never be hostile to trends. Pay attention to the efficiency of funds and don't carry it at every turn.

Seven stop loss methods

In the big picture, there are two methods of stop loss. The first type is the regular stop loss, that is, when the reasons and conditions for buying or holding disappear, then even if you are in a loss state, you must immediately sell. The regular stop loss method is completely based on the reasons and conditions of the original purchase. Because the reasons and conditions for each purchase are very different, the regular stop loss method cannot be generalized. For example, assuming that the original buy and hold conditions were that the 5th, 10th, and 30th moving averages were rising, then if one of the moving averages crosses another moving average and the rising ranking is damaged, you should immediately sell. As another example, suppose that the original reason for buying was that a favorable asset reorganization is expected to occur in the listed company. If it proves that the reorganization fails, it should be sold immediately. The second type is auxiliary stop loss. The methods here are varied, and are also a topic that many people often like to talk about. Let's use a certain space to introduce the common auxiliary stop loss methods as comprehensively as possible.

Maximum loss method. This is the easiest way to stop loss, and stop the loss when the floating loss of the individual stocks reaches a certain percentage. This percentage depends on your risk appetite, trading strategy, and operating cycle. For example, the short-term (T + 1) can be 1.5 to 3%, the short-term (about 5 days) can be 3 to 5%, and the medium-long-term can be. It is 5 to 10%. Once this percentage is set, it cannot be easily changed and must be resolutely implemented.

Retraction of stop loss. If the price rises after buying, reaches a relatively high point, and then falls, you can set a stop loss target from the relatively high point. The specific value of this range is also determined by individual circumstances, and you can generally refer to the above. Say the percentage point of the maximum loss method. In addition, you can also add the factor of the down time (that is, the number of days), such as setting a retracement of a 5% drop within 3 days to perform a stop loss. Retraction stop loss is actually more often used for take profit.

Stop loss sideways. The stop loss target is set at the time when the price is horizontal within a certain range after the purchase. For example, you can set a stop loss if the increase within 5 days after the purchase does not reach 5%. Horizontal stop loss is generally used at the same time as the maximum loss method to comprehensively control risk.

Expected R multiplier stop loss. The R multiplier is the profit divided by the initial risk. For example, the final actual profit of a transaction is 25%. The initial risk is assumed to be 5% according to the maximum loss. Then the R multiplier for this transaction is 5. We will now apply its concept in reverse, first calculate an expected return, then determine the expected R multiplier, and then divide the expected return by the expected R multiplier. The result is the stop loss target. Regarding the determination of the expected return, if you are a system trader, you can use the average return on each transaction tested by your system history (note that it is not the average annual return); if you are not a system trader, you can use experience Determine the expected return on the transaction. The expected R multiplier is generally between 2.7 and 3.4.

Moving average stop loss. Short-term, mid-term, and long-term investors can use MA5, MA20, and MA120 moving averages as stop loss points, respectively. In addition, the stop loss effect of EMA and SMA moving averages is generally better than MA. The MACD red bar starts to fall can also be a good stop loss point.

Cost moving average stop loss. The cost moving average considers the volume factor more than the moving average, and the effect is generally better. The specific method is basically the same as the moving average. However, it should be reminded that the moving average is always a lagging indicator, and you cannot expect too much of it. In addition, in the consolidation phase, you have to prepare to endure a large number of false signals of the moving average.

Stop loss at the Bollinger Band. In an upward trend, you can use the Bollinger Bands median line as a stop loss point, or you can use the Bollinger Bandwidth reduction as a stop loss point.

Volatile stop loss. This method is more complicated and is often used by masters, such as using the Bollinger channel of average actual price range, or the moving average of the attack intensity as the stop loss target.

K line combined stop loss. Including short cannons with two yin clips and one yin, two yin and yin after yin, or a guillotine with a yin and three lines, and the star of dusk, piercing, shooting star, double flying crow, three crow hanging Typical top-line K-line combinations such as treetops.

K line pattern stop loss. Including the stock line breaking the head and shoulder top, M head, arc top and other head shape neck line position, one Yin break three lines guillotine.

Tangential support stops. The stock price effectively falls below the trend line or penetrates the support line, which can be used as a stop loss point.

Gann line stop loss. The stock price effectively breaks the Gann angle line 1 × 1 or 2 × 1 line, or a turning point in the key position of the time-resistance network and time-resistance arc can be used as a stop loss point.

Stop loss at key psychological levels. Some key psychological price levels are created by stock appraisals and media partnerships. If a stock appraiser says that what price to pay attention to a certain stock, this sentence is widely known in the market, then this price becomes the market psychological price. In addition, whole digits, historical highs and lows, issue prices, and recent large-scale large-scale orders may all become key psychological prices.

Stop loss in chip-intensive areas. The dense area of the chip will have a strong support or resistance to the stock price. After a solid dense area is penetrated downward, it will often be transformed from the original support area to the resistance area. Set a stop loss level according to the chip-intensive area, and once the position is broken, stop loss immediately. However, it should be noted that most of the stock software currently on the market does not consider the factor of removal when dealing with chip distribution. If your stock has undergone a large-scale removal of rights recently (usually within one year), you need to prevent the software from marking the wrong position of the chip-intensive area.

Move the stop loss on the chip distribution chart. The reason for the upward movement of the chip distribution chart is generally high volume. If the upward movement forms a new dense peak, the risk is often very high, and you should stop loss or win in time.

SAR (parabolic) stop loss. In the upward trend, especially when the hot stocks that have accumulated a certain amount of gains enter the last crazy acceleration, SAR is a good stop loss indicator. However, during the consolidation phase, SAR has basically failed, and the consolidation phase generally accounts for more than half of the market's operating time.

TWR (Pagoda Line) Stop Loss. The role of the pagoda line for judging the top is obvious. Generally, when there is a large increase, a three-flat top or continuous red column appears. If the green turns at this time, it usually indicates that the decline is about to begin and a stop loss should be performed.

CDP (Contrarian Operation) Stop Loss. When performing ultra-short-term (T + 1 or T + 2) operations in the middle and late stages of a bear market, the NL of the CDP can be used as the stop loss point.

Mutation stop loss. Sudden changes are sudden large changes in prices. For stop loss, it is mainly to prevent opening gaps and late diving. Most of the mutations are caused by major external factors, such as the September 11 incident and major policy changes. Late-day diving is generally caused by policy changes, mostly because of new documents issued by government departments after work at 2:00 pm. Therefore, it is recommended that office worker investors, if possible, check the market as quickly as possible at 9:30 am and 2:30 pm, or agree with other professional investors to notify them as soon as possible to avoid losses caused by the mutation.

Fundamental Stop Loss. When the fundamentals of individual stocks have undergone a fundamental change, or the expected benefits have not appeared, investors should abandon any illusions, kill them regardless of cost, and run away. At this time, they can no longer look at any pure technical indicators. If there is any significant unfavorable news for the Zhuanggu Zhuang institution, such as being investigated or there are indications that its funds are broken, it should also be cut out.

Market stop loss. Judging the broad market trend is the premise of operating individual stocks, and the kind of saying "put aside the broad market to be a stock" in a bear market is very harmful. Generally speaking, the systematic risk of the broader market has a gradual accumulation process. When it is found that the broader market is already in a high-risk area and there is a possibility of a large mid-line decline, the position should be lightened in time. Out. The heroes who are against the market let others do it. We only waited for the big army to come back before rushing to the front.

The methods of auxiliary stop loss are far more than those mentioned above, and the above list is also for reference only. According to your own operating style and the specific circumstances of each operation, it is most important to establish and skillfully use your own stop loss method. Mr. Chen Hao has a general idea: there can be N reasons for buying, but only one reason for selling is enough. Therefore, it is recommended to better master some auxiliary stop loss methods, both for screening optimization and comprehensive use. For large friends with a capital of more than 500,000, or investing more than 200,000 yuan in a single stock, you should also pay attention to the setting of the stop loss point as much as possible above the key market price. I can't get in and out.

Eight, reduce the occurrence of stop loss

In theory, the best way to stop loss is to not need stop loss, which is to improve the accuracy and accuracy of operational decisions. In addition to mastering the basic skills in stock selection, you can also use the aforementioned stop loss method as a restrictive condition to add to the buying decision process. No matter what reason and condition you choose, after you have selected a stock, you also need to see if the stock is currently in a state of stop loss in accordance with your auxiliary stop loss method. By adding the stop loss method in turn as a restrictive condition for buying decisions, the occurrence of the need for stop loss can be reduced to a considerable extent.

Investors are advised to pre-set a stop-loss point or a stop-loss plan for all transactions before buying, and treat this work as a necessary decision-making procedure or operating discipline. When you set a stop loss point in advance, you will be more calm and less irritable, thereby reducing the possibility of making wrong decisions. Strictly speaking, stop loss actually belongs to the content of fund management, and a clear and complete fund management plan is a higher level than the individual stop loss.

Nine, psychological topics

Finally repeat again: Always stand at zero. Just as buying may make mistakes, stop loss will also make mistakes. When you find that your stop loss is wrong, you have to spare no effort to get into the forward team again. In short, it is necessary to overcome greed and fluke with reason and decisiveness in order to keep up with the market for a long time.

Tips for Stop Loss

Stop loss is an important means of protecting yourself in stock trading. Just like the brake device in a car, it is good at "braking" in case of sudden conditions to ensure safety. The ultimate goal of stop-loss is to preserve strength, improve capital utilization and efficiency, and avoid small mistakes from making big mistakes and even lead to the annihilation of the entire army. Stop loss cannot avoid risks, but it can avoid greater unexpected risks. How to set the stop loss level? There are the following methods for reference:

Balance point stop loss method: After the position is opened, the original stop loss level is set. The original stop loss level can be set at a position of 5% -8% from the position opening price. After the buy, the stock price rises, and the stop loss is shifted to the open position price. This is your break-even point position, that is, the stop loss level. Based on this, investors can effectively build a "zero-risk" system that can cash out some or all of their profits at any time. After the balance point stop loss system is established, the next purpose is to cash out and close positions. Cashing out and closing a position is very technical, but no matter what closing technique is used, as the stock price rises, the stop loss position must be adjusted accordingly. For example, if an investor buys at 10 yuan, the original stop loss level is set at 9.2 yuan. If the stock price drops all the way after the purchase, the stop loss can be played at 9.2 yuan. If the stock drops below, you can clear the position and exit; if the price continues to rise after the purchase, you can adjust the stop loss level immediately. If the stock price rises to 12 yuan, the stop loss can be adjusted to 11 yuan, the price rises to 13 yuan, and the stop loss also "rises" to 12 yuan.

Time stop loss method: People generally pay attention to the stop loss of space, without considering the time factor. As long as the price drops to a certain pre-set price, the position is closed out, which is the space stop loss. The advantage of the space stop loss method is that you can wait for the big market by sacrificing time. The disadvantage is that after a long wait, you often have to stop loss, which delays time and loses money. For this reason, the concept of time stop loss needs to be introduced. Time Stop Loss is a stop-loss technology designed based on the trading cycle. For example, if we estimate the trading cycle of a stock to be 5 days, after buying, it will hover over the line of the buying price for more than 5 days. warehouse. From the perspective of the spatial stop loss, the price may not have reached the stop loss position, but the holding time has crossed the time limit. In order not to expand the loss of time, you may wish to get out first.

Technical stop loss method: Setting stop loss orders at key technical levels can avoid further expansion of losses. There is no fixed pattern for the technical stop loss method. Generally speaking, the use of technical stop loss method is nothing more than betting on big profits with small losses. Its main indicators are: 1. The important moving average is broken; 2. The tangent of the trend line is broken; 3. The neckline of the head shape such as head and shoulders, double top or arc top is broken; 4 1. The lower rail of the rising channel is broken; 5. The vicinity of the gap is broken. For example, after buying in the lower rail of the uptrend channel, wait for the end of the uptrend to close the position and set the stop loss level near an important moving line. As another example, after the market enters the consolidation phase, a converging triangle usually appears, and the deviation rate between the price and the medium-term moving average (usually 10-20 antennas) gradually decreases. Once the deviation of the price from the medium-term moving average is re-amplified, it means that the game has ended. If the price turns into a downtrend at this time, it should decisively leave the market.

The need for stop loss

Volatility and unpredictability are the most fundamental characteristics of the market. This is the basis for the existence of the market and the cause of risk in transactions. This is an immutable feature. There is never certainty in trading. All analysis and prediction are just a possibility. Transactions based on this possibility are naturally uncertain. Uncertain behavior must have measures to control the expansion of its risks and stop losses. That's how it happened.

Stop loss is naturally generated by human beings during the trading process. It is not deliberately made. It is an instinct for investors to protect themselves. The uncertainty of the market has created the necessity and importance of stop loss. Successful investors may have different trading methods, but stop loss is a common feature that guarantees their success. Soros, the world investment master, said that there is no risk in investment itself, and that there is risk in out-of-control investment. Learn to stop losses and never fall in love with losses. Stop loss is far more important than profit, because at any time the principal is guaranteed, and profit is second. The establishment of a reasonable stop loss principle is quite effective. The core of the prudent stop loss principle is not to allow the loss to continue to expand.

Why stop loss is so difficult

It is important to understand the meaning of stop loss, however, this is not the end result. In fact, there are many examples of investors setting stop losses without executing them. In the market, the tragedy of being swept out is happening almost every day. Why is stop loss so difficult? There are three reasons: one is the fluke mentality. Although some investors also know that the trend has broken, but because they are too hesitant, they always want to take a look and wait for a while, causing themselves to miss the great opportunity to stop loss. Second, frequent price fluctuations will make investors hesitate Indetermination, the often wrong stop loss will leave investors a lingering memory, which will shake the investor's determination to stop loss next time. Third, implementing stop loss is a painful thing and a bloody The process is a challenge and test to the weakness of human nature.

In fact, we cannot determine whether it is the correct state or the wrong state for each transaction. Even if we make a profit, it is difficult for us to decide whether to play immediately or to wait and see, let alone in a quilt state. The instinct of human pursuit of greed will make every investor unwilling to win a few points less, and less willing to lose a few points.

Programmatic Stop Loss

It is precisely because of the above reasons that when the price reaches the stop loss level, some investors miss their positions, suffer losses, and the stop loss position changes over and over again; some investors temporarily change their positions, increase their positions against the trend, and try to make a desperate attempt to recover losses; Some investors have simply adopted the "ostrich" policy after the losses have expanded and left it alone. In order to avoid these phenomena, the author thought that a programmatic stop loss strategy could be adopted.

Large international futures exchanges usually provide stop loss orders. Traders can set a price in advance. When the market price reaches this level, the stop loss order will automatically take effect immediately. While domestic futures exchanges currently do not have stop loss orders, but can use advanced futures trading tools, which is currently a simple and effective method to help investors strictly implement stop losses.

At present, some domestic trading systems can provide two types of stop loss orders: market stop loss and limit stop loss. The market stop loss refers to sending a stop loss order at the market price as soon as the market price reaches the preset stop loss level; the limit stop loss sends an order at the limit price when the market price reaches the preset stop loss level. The market stop loss order can ensure the success of the stop loss, while the limit stop order can avoid unnecessary losses when the price is not continuous, both of which have advantages and disadvantages. Generally, a market stop loss order is used on a product that is actively traded, while a limit stop order is used on a product that is not actively traded.

This trading system helps investors to develop good stop loss habits, thereby avoiding risks in the market, minimizing losses, making them passive and active, and being invincible in the investment market.

How to understand stop loss correctly

Uncertainty in the market and volatility in prices determine that stop loss is often wrong. In fact, in each transaction, we can't figure out whether to stop the loss. If the stop loss is right, it may be ecstasy, and the stop loss is wrong, not only will the pain of reducing funds, but also a way to be fooled. It is the pain that is the most unbearable for investors.

Therefore, understanding stop loss is essentially how to correctly understand a wrong stop loss. We should also accept the wrong stop loss. For a simple example, if your stop loss is correct in the transaction, it means that every transaction is correct, and if your transaction is all That's right, why stop? Therefore, stop loss is a cost, a cost of finding profit opportunities, and a price that must be paid to trade a profit. This price is only small or large. There is no right or wrong. If you want to profit, you must pay. Cost, including the cost of a false stop loss.

Face the wrong stop loss frankly, don't avoid it, let alone fear. Only in this way, you can trade normally and finally make a profit. This is my understanding of stop loss, including the understanding of wrong stop loss.

Issues to be aware of

First, "Everything is ruled before it is established, or it is abolished if it is not planned." All stop losses must be set before entering the market. When investing in stocks, you must develop a good habit of setting stop losses when you open a position, and it is often too late to consider what standard to use when a loss occurs.

Second, stop loss should be combined with trend. There are three trends: up, down, and consolidation. In the consolidation phase, the probability of the stop loss being erroneous within a certain range is greater. Therefore, the execution of the stop loss must be combined with the trend. In practice, the author thinks that consolidation can be seen as an incomprehensible trend, and investors can rest and rest.

Third, choose a trading tool to grasp the stop loss level. This varies from person to person. It can be moving averages, trend lines, patterns, and other tools, but it must be suitable for you. Don't use it blindly because others use it well. The identification of trading instruments is very important, and the ability to use trading instruments can lead to completely different trading results.

What is the stop price

The stop loss price is a protection mechanism to avoid getting deeper and deeper. When the set stop loss price is reached, the system automatically closes the position and exits.

Stop Loss Three Taboos

Stop loss is known as one of the prerequisites for short-term operations of investors. For investors who like short-term operations, stop loss is conducive to controlling their investment losses within a certain range, so it is considered as Important magic weapon for short-term operation. However, for stop loss, I think it is better to be cautious. Stop loss is a double-edged knife. After all, stop loss means cutting meat. If frequent stop loss and frequent meat cutting, then the large households in the stock market have long been cut into small retail investors, and the small retail investors have therefore cancelled their accounts to become the stock market. " "Black households". And stop loss as a speculative method, its accuracy is not high, and once the operation is wrong, you will cut the "meat" to a low point and can no longer pick it up, but the chips that could have made money because of the stop Loss into a loss operation. There are too many such cases in the stock market. According to the author's stock experience and lessons, the following three situations are not suitable for stop loss.

First, in the case that the fundamentals of listed companies have not deteriorated significantly, the chips in historical low-price areas are not suitable for stop loss. Stopping losses on such chips often means giving away profits to others. For this kind of stock, a certain amount of breaking down, investors can boldly make up positions. Like the Lanzhou Minbai (600738) in August 1998, after the implementation of the rights issue, the stock index fell sharply, and as a result fell below the historical low of 7 yuan, and once hit the stock price to 6.30 yuan. But soon the stock price was pulled up, and the stock also embarked on a bullish journey. Another example was Qiuling shares (600891), which at one time fell below the historical low of 6 yuan, hitting a new low of 5.06 yuan, but soon pulled above 9 yuan. If investors cut off these stocks at these low points, I'm afraid they will regret it for a lifetime.

Second, it is not suitable to stop losses for individual stocks on the way. According to the view of wave theory, a complete rising wave is composed of five waves, of which 1, 3, and 5 waves are rising waves, and 2, 4 waves are adjusting waves. The decline of the stock price during the rise should be regarded as an adjustment to the rise and an opportunity to purchase. If this is a stop loss, the chip will often be thrown to a relatively low level, thereby reducing the return. The Shanghai stock market was adjusted to 1893 points. At that time, many stocks had fallen by more than 7%. If they stopped, then they would have left their chips above a low point.

Third, stocks that have fallen at a high level should not rush to stop losses. The dealer's shipments are often completed in multiple iterations. Although you are caught, but if it falls immeasurably, then you can wait patiently for the dealer to unwind out or lose a little less when the next time it is pulled up. Especially for some small-cap stocks, and the stocks are not particularly large, after a period of consolidation, the banker is more likely to raise the stock price again. As recently as Wujiang Power (0975), in early July, the stock price fell from 27.30 yuan to 24.40 yuan, a drop of more than 10%, but the stock subsequently pulled up again, hitting a new high of 27.90 yuan. If the investor stops at 10%, then he is throwing his chips to a short-term low. Of course, for those stocks with huge gains and heavy volume declines, investors must stop losses as early as possible, so as to prevent the dealer from diving and shipping, which will bring you heavy losses.

Effective method of loss method

1, fixed stop loss method

This is the simplest method of stop loss. It refers to setting the loss amount to a fixed ratio, and closing the position in time if the loss is greater than this ratio. It generally applies to two types of investors: one is an investor who has just entered the market; the other is an investor in a market with higher risks (such as the futures market). The mandatory effect of the fixed stop loss is obvious, and investors do not need to rely too much on the judgment of the market. The setting of stop loss ratio is the key to fixed stop loss. The ratio of the fixed stop loss is composed of two data: one is the maximum loss that the investor can bear. This proportion varies according to investor mentality and economic affordability. It is also related to investors' profit expectations.

The second is the random fluctuations of trading varieties. This refers to the disorderly price fluctuations caused by the behavior of market trading groups when there are no external factors. The fixed stop loss ratio is set to find a balance point in these two data. This is a dynamic process and investors should set this ratio based on experience. Once the stop loss ratio is set, investors can avoid being shaken out by unnecessary random fluctuations.

2.Technical stop loss method

More complicated is the technical stop loss method. It is a combination of stop loss setting and technical analysis. After eliminating random fluctuations in the market, it sets stop loss orders at key technical levels to avoid further expansion of losses. This method requires investors to have strong technical analysis ability and self-control. The technical stop loss method is more demanding for investors than the former one, and it is difficult to find a fixed model. Generally speaking, the use of technical stop loss method is nothing more than betting on big profits with small losses. For example, after buying on the lower track of the rising channel, wait for the end of the uptrend to close the position, and set the stop loss level near a relatively reliable average moving line. As far as the Shanghai market is concerned, when the broader market index goes up, the 5-day moving average can maintain the short-term trend, and the 20-day or 30-day moving average will maintain the medium-to-long-term trend. Once the rising market starts, you can intervene at the 5-day moving average and set the stop loss near the 20-day moving average. You can enjoy most of the profits brought by the rising market stage, and you can get out in time to ensure profits . At the beginning of the rising market, the distance between the 5-day moving average and the 20-day moving average is very small. Even if you read the market incorrectly, stop the loss near the 20-day moving average. For another example, after the market enters the consolidation phase (settlement), a box shape or a convergent triangle usually appears, and the deviation rate between the price and the medium-term moving average (usually 10-20 antennas) gradually decreases. At this time, investors can step in at the maximum deviation rate in technology and set the stop loss at the maximum deviation rate in the game. This way you can go in and out and get the difference. Once the deviation of the price from the medium-term moving average is re-amplified, it means. If the price turns into a downtrend at this time, investors should decisively leave the market. The game is relative to the unilateral market. At the beginning of the game, the market is unstable and the market is volatile, and traders can step in. In the later stages of the game, the scope of the stop loss should be appropriately reduced to improve the insurance factor.

3.Unconditional stop loss method

Regardless of cost, a stop loss that runs away is called an unconditional stop loss. When the fundamentals of the market take a fundamental turn, investors should abandon any illusions and kill them regardless of cost in order to preserve their strength and fight again. Changes in fundamentals are often difficult to reverse. When the fundamentals deteriorate, investors should take the initiative and cut out positions.

In summary, stop loss is a necessary means to control risks. Investors should have their own styles on how to make good use of stop loss tools. In the transaction,

It is very important for investors to grasp the overall position and trend of the market. Stop loss is used more in the high price circle, less or not used in the low price circle, and it should be determined by the market movement trend in the medium price circle. Taking advantage of the trend, using stop loss is the only way for investors to win.

Preventing Four Stop Loss Misunderstandings

Misunderstanding 1: frequent stop loss, the more stop the more loss

Most newbies who are new to the futures market, after suffering losses due to untimely stop loss, will generally learn from the lessons and strictly formulate the principle of stop loss. However, because of the "snake bite and ten-year fear of well rope" mentality, it is easy to go to the other extreme, because of the unfamiliarity with the market and the lack of confidence in trading. Frequent stop loss.

The harm of this misunderstanding is also huge. No matter how large the amount of funds is, no account can bear long-term losses. What is more serious is that when the amount of funds is getting smaller, investors may gradually lose their confidence in analysis and trading. , Always hesitating between stop loss and non-stop loss, it is difficult to formulate and implement a reasonable stop loss plan.

To prevent this, investors should first familiarize themselves with market rules and price fluctuation characteristics before trading any symbol, and develop different stop loss strategies and stop positions based on different symbols.

Misunderstanding 2: Losses can be "pulled" back

When a loss occurs, investors are often indecisive, fortunate, abandoning the implementation of the stop loss plan, hoping to delay the wait for the market to reverse, and "drag" the loss back. Especially when the loss is huge, it will be psychologically unbearable, and I hope to reduce the magnitude of the loss through delay. This is the most difficult and most common psychological misunderstanding in futures trading.

In fact, any transaction has the best stop loss timing and stop loss position. Once missed, not only will it not be able to recover the initial loss, but it may also cause huge losses. Especially when there is a loss in contrarian operations, we should take the initiative and strictly implement stop loss. This is the so-called "no fear of mistakes, only fear of dragging."

Misunderstanding No. 3: Stop small losses and lose big money

After some investors have certain trading experience, they tend to overestimate their stop loss capabilities and fall into the misunderstanding of stopping small losses and making big money in stop losses. For example, when the loss is within 10%, a reasonable and timely stop loss can be made, but when the loss exceeds 50%, it is unwilling to stop the loss.

How to set stop price

It is normal for stocks to make losses due to misjudgments. The key is to find out the reasons and lessons after mistakes and losses, and to avoid making the same mistakes again. Comparatively speaking, it is much smarter to prevent high-tightening in advance than to rack your brains afterwards.

In actual combat, investors need to prevent in advance without being trapped at high levels. Please keep in mind the three most common disciplines: 1. Do not buy after the rally and avoid participating in the callback; 2. Do not rise suddenly after a long period of rise Buy when zooming in; 3. Don't buy after the long-term rise and announce the major good news that the market has already expected; if investors can calmly face the above situation and control their emotions, then they can avoid at least 80% of the high level trap. Of course, in case of accidental quilt, the courage to plead for compensation and stop loss is also an essential quality for investors, because only the courage to plead for compensation will be able to make bold profits in the future.

So how to set the stop price in actual combat? The author believes that the price of selling the pledge can refer to the following points: 1. The stock price fell below the middle price of the previous trading day; 2. The stock price fell below the lowest price of the previous trading day; 3. The stock price fell below the 5-day cost moving average 4. The stock price fell below the upward trend line; 5. The price fell below the lower edge of the previous stock price consolidation platform; 6. The stock price fell below the triangular bottom formed by the previous period of shock convergence.

Establishing the pledge price level is a technical issue, and it can also be formulated with the extent of psychological loss, such as -3%, -5% as the departure standard, and it is also an effective method to cope with the high position.