What is meant by stop losses selling?

By Intelligent Investor · 29 Jun 2001

By Intelligent Investor ·
29 Jun 2001

A stop loss refers to a shareholder selling out of a stock at a pre-determined price or percentage fall. This may be based on the price paid for the stock or it could even be used as an exit point when a stock keeps hitting new highs.

For example, you purchased Foster's Brewing for $5 and are prepared to suffer losses down to $4.50 before you choose to sell out (stop) your losses. Or what if Foster's runs up to $5.70 and begins to turn downwards? You could maintain your $4.50 stop loss or guarantee yourself a profit and move the stop loss up to $5.50.

A stop loss strategy is up to you, but beware, if you trade through an online broker you will not be able to put stop loss sell orders on to the market below the current market price. You would only be able to place such an order through a stockbroker.

IMPORTANT: Intelligent Investor is published by InvestSMART Financial Services Pty Limited AFSL 226435 (Licensee). Information is general financial product advice. You should consider your own personal objectives, financial situation and needs before making any investment decision and review the Product Disclosure Statement. InvestSMART Funds Management Limited (RE) is the responsible entity of various managed investment schemes and is a related party of the Licensee. The RE may own, buy or sell the shares suggested in this article simultaneous with, or following the release of this article. Any such transaction could affect the price of the share. All indications of performance returns are historical and cannot be relied upon as an indicator for future performance.

What is meant by stop losses selling?

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