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Robbie has been trading full-time since 2001. His book "The Naked Trader" (which also has useful information on how to use advfn) has become one of the biggest-selling finance books, reaching the top 150 books on Amazon - order it here. Trades made for Robbie's website have amassed profits of more than £300,000. You can read about his buys and sells daily at www.nakedtrader.co.uk.
I'm getting quite a few e-mails from people who keep losing money and they blame it on stop losses. "The share goes down to the stop loss, I get closed out and then it goes right back up again," they wail. On investigating further nearly every time this trade was done on a spreadbet. The spreadbetting firm closes the bet the moment the price reaches the stop loss even for a second. Which is fair enough. People tend to blame the spreadbetting company involved but I don't think that's fair. After all, if they hadn't got you out and the share kept falling you wouldn't be happy would you? And looking into it even more the problem seems to be where the stop loss is set - and most of those moaning seem to be setting their stops too close to their entry point. If I was going long on a share at 500p I would not be setting a stop loss at 470! I would give it much more leeway. And I would look at the chart. Where was the last support level? If on the above example the last support was 460, set the stop loss under that, and also under a whole number, so say 447. Another point to make is, as long as you're reasonably near a screen for most of the day, perhaps it's best not to set an automatic stop loss order but in fact use your own judgement. So for example I would write down my stop - if the share in question reached it I could then use advfn level 2 to see for myself whether it was just a quick spike down rather than let the spreadfirm take me out. Do remember the market is a ruthless place. Market makers and other participants will have a pretty good idea where stops are and the best way for them to pick up cheap shares is to push the price down to stop loss areas to encourage forced sellers. One thing to remember about stops, particularly with brokers is, watch for ex dividend days. Remember if a stock you are in goes ex for 20p it will start the day 20p lower - ensure your stop is changed before the day itself if you own the share outright! The current volatile markets does make managing stops difficult. But for spreadbetting especially it can actually pay to ensure they are not too tight!
You can read Robbie’s daily market comments together with his latest buys and sells at his website www.nakedtrader.co.uk
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