You may have heard about these – but what are they? Stop losses are orders that are activated when you say “enough is enough”, and take your loss on the chin before it gets any bigger.
This is such an important topic – I refer to stop orders constantly throughout this book – that I thought it deserves its own chapter.
Before diving into the detail of stop orders, let’s first look at a simple share investment made by an investor, who we will call Bob.
The following chart shows the share price for a company – for the moment it’s not important to know the name of the company. Bob has been following this company and notes that while the shares had been ...