There are countless different ways to invest in the stock market.
Even if you don’t want to use the added leverage of things like options trading, you still have the choice of trading stocks, commodities, forex, bonds, exchange-traded funds…the list goes on and on.
But the big mistake that most investors make – the one that costs them thousands and thousands of dollars – is not knowing this simple tool you already have that gives you unlimited upside with a known, small downside potential…
If you’ve done any personal trading and investing in the stock market, you’ve likely had the unfortunate pleasure of losing big money at one time or another.
For many, it’s a simple right of passage…but a horrible and unnecessary one.
And it’s usually the product of a lack of experience and/or knowledge, with emphasis on the later. And of course by knowledge I don’t mean having book smarts…
I’m talking about knowing the simple yet powerful secrets that happen to be all over Wall Street.
And right now I’m going to give you one of my favorite secrets of all; one that I use every single time I trade, no matter what…
The stop loss.
If you don’t have any idea what a stop loss is or how to use it, don’t worry. You’re in the majority.
Put simply, a basic stop loss is a price point at which your trade will automatically be closed out if it hits that price.
Here’s an example to clarify:
- You decide to buy Stock A at $100 per stock.
- You identify a good line of support at $94 by using the powerful strategy given in Code Breaker.
- You know that if Stock A falls below that line of support it’s no longer a good trade, so you set a stop loss at $93.
Here are your two possible outcomes now:
1. Stock A climbs as it likely will if you traded using the Code Breaker And it could climb ANY amount. If it only climbs to $110, you make 10%. If it climbs to $125, you make 25%. And if it climbs to $200, you make 100% on your investment!
OR
2. Stock A falls down to $93, triggers your stop loss, and the trade is closed for a small 7% loss. So you can be virtually certain that the worst possible outcome is a small loss!
A stock would have to gap down and skip your stop loss price to give you any larger loss, which is a very rare occurrence.
Again, the stop loss tool is something that I use with EVERY trade I make. It’s crazy not to use it when it gives you an unlimited upside with a small, known downside potential.
And this tool can be used in reverse for short sell trades, too!
So make sure a stop loss is included with every trade you make going forward.
BONUS TIP: Make sure there’s a good place for the stop loss within 10% of your entry price. As a general rule, if you can’t find one within 10%, don’t make the trade.
This could save you thousands…
