Are stop loss orders ever used? Which tactics do you use? Is it fixed at five percent of your initial investment? Theoretically, there would be no tax burden, loss protection, and the ability to reenter the stock if desired. Or am I understanding this the wrong way? How do you utilize stop orders to minimize tax burden while safeguarding your investments?
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Just as readily, stop losses can lock in losses and obstruct recoveries. Unless you believe you can foresee stock changes, they are not a trustworthy tool to protect your capital.
Additionally, they don’t actually help with taxes. Unless you are attempting to automate the harvesting of tax losses or anything similar, in which case this would be an awful method.
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If another Black Monday were to happen, would setting a stop loss at 30% below be beneficial?
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Are you referring to a market order or a limit order?
If the market fell past your trigger price, the former would be of no assistance. You might sell, but maybe at the very lowest.
The latter might not fire at all, so it would not assist.
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I can’t help but remember of the burn I experienced at the end of November 2021, when everything crashed and burned and I lost a sizable portion of my funds. In the future, I am considering whether to sell in a situation similar to this one or to ride the wave once more and accept that it won’t recover. I didn’t sell, instead, I stayed, and some of the properties rebounded, but not nearly to where I was. Could that have been avoided with a stop loss?
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I rarely use stop losses, but when I do, I usually set them just a few cents below the recent local bottom the lowest candle within recent price activity. It has saved me quite a few times.
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They are called take loss or stop gains by me, and I detest them. For equities that are erratic, they are worse than useless. Perhaps useful for slow-moving equities, particularly if you have profits and don’t keep track of them, but for fast-moving stocks, like tech companies, you merely get bounced out at the lows and miss the gains.