These aren’t really different strategies at all. Rather, we’re listing five of the most popular stop loss strategies. Some stop loss strategies are better for some stocks than others and others are better for a different type of trading.
The five best stop loss strategies for 2022 are:
Single Price Stop Loss (SPDS)
A single price stop loss strategy, or SPDS, is a most popular stop loss strategy. The SPDS stop loss requires that the entire position be closed at the exact same price. The strategy is used when there’s not enough time or room to buy back the full position at a lower price.
The logic behind the strategy is that if a stock hits a low, the price will bounce back. At that point, the trader has time to buy the position back at a lower price and pocket the profit. If you want to become an investor then veracity markets minimum deposit is not more than $250.
Nasdaq 100 Buy-Write
This strategy involves writing call options on a subset of the Nasdaq 100 index. The idea is that a stock that has declined in value can bounce back, and you can write call options on that stock at the same price you bought it.
This strategy works well in bull markets because some of the big names in the index have fallen a lot but still maintain significant upside potential. It relies on finding stocks that have fallen a lot but have less downside potential.
Major Stop Loss Strategy
The major stop loss strategy (MSD) is a common stop loss strategy, but there are definitely better options available. The MSD is designed to maintain maximum capital commitment.
The MSD is a very simple strategy: the trader sets a stop loss of 95% (or more), and if the stock hits that level, he’s out of the trade. If the stock doesn’t get below the stop loss, the trade continues.
Short Sell Strategy
When a stock has risen significantly, it often takes on a mind of its own. It makes stock moves that are generally outside the trader’s control, and as a result, the trade might fail to complete. The key to short selling is anticipating those types of movements.
The best way to trade the short sell strategy is to invest a lot of time researching the ticker and reading some of the latest news on the company. You might even spend time writing a research report that emphasizes some of the weaknesses of the company.
Bear Market Buy-Write Strategy
This is our favorite strategy for a bear market. It requires the trader to keep a close eye on the action in the stock market, but if the trader’s pay attention to this strategy and follows the rules it will work.
The idea behind the strategy is that a stock will make a precipitous downward movement, often followed by an equally steep upward movement. This is known as a “double bottom,” and as long as the stock continues to move upwards it will give the investor the opportunity to buy the stock at a low price and continue to write call options at that price.
Conclusion
Sticking to your stop loss strategy is a good idea, however, it can be tricky to know when to pull the trigger. The above strategies can help in deciding when it’s best to exit your long-term investments.