Stock Trading: How to Place Stops and Limits

Getting into a trade is often the most glamorous part of stocktrading. Knowing which trades are likely to turn a profit anddiving into those trades can make a day trader feel reallyknowledgeable and involved in the market. Being a good trader doesn't only mean knowing when to get into atrade, it also means knowing when to get out. The followingguidelines are meant to get you started, but remember thattrading is a continuing journey of discovery about the tradablenuances of market moves. Make sure you're familiar with historical support and resistancelevels. Also, check out momentum readings as well as BollingerBands to inform you about where to put stop and limit orders. It's also a good idea to use trailing stops. They will allow youto ratchet up a sell stop slowly as your positions change to bein your favor. When getting involved in stock trading,sometimes avoiding mistakes is more important than doing theright thing. Don't place your stops according to how much moneyyou need to make. The market doesn't distribute profits based onthe needs of its investors. Just because you need to make 500dollars this week and you can't afford to lose more than 250,the market doesn't really care. Sometimes the amount of money you need to make will correlatewith how you set your limits and stops. However, these figuresrarely work out to be the same. Thus, you should never use yourneeds as a guide to where to place your stops and your limits. Another important thing to remember is not to invest when youare "on tilt". Being on tilt means that you have just lost somemoney on a trade and you want to make it back quickly. Supposeyou have just lost $300 on your last trade. You shouldn't setyour exit limits to make all that money back on your next trade.After all, the smart limits on this next trade are not dictatedby how well (or how poorly) you did on your last trade. Stock trading "on tilt" is a sure way to lose money. Use thestock trading tips mentioned earlier to guide your trades ratherthan using impulses based on flimsy reasoning and financialneed. Always let the market determine where you should put your stopsand how you should set your limits. Letting go of yourexpectations will help you be an objective trader and willincrease your profits.