it all depends, pug. it depends on many factors. for one, what is the timeframe that you desire to hold the stock? if this is a stock that you hope to hold for a long time, you may set the stop loss at a riskier price. interestingly, some would do the exact opposite. almost more importantly, how volatile is the stock? let's say that a stock at price of $10 sees an average daily trading range of a dollar. all things being equal, when the stock is $10, it will trade between $9.50 and $10.50. if you set your stop loss at 5%, it will very likely be triggered before it rises to, if it rises to, $10.50 before it falls back to $10. in this example, had you set a stop loss at above 5%, you would not have lost the 5% and you would have had a zero gain/loss day. another consideration is how afraid you are of losing your money. if this is a pure speculation play with some fun money, perhaps you're more willing to set a risky stop loss. if it's money for investing and you're trying to safeguard it, setting a stop loss that would yield a minimal loss would be wise. heck, some brokerages don't even allow stop losses for certain penny stocks and otcb/pink sheet stocks.
opinions on stop losses vary greatly. trailing stop losses are another option. if the stock increases to $12 from $10, do you now set a stop loss based on the current price of $12, or do you safeguard your original investment? if you set a new stop loss or a trailing stop loss, you might be stopped out of a bigger gain, because stocks often go through a retracement (a price correction) after a gain but before an even bigger gain.
so many things to consider, pug. some of the standard stop losses are 3%, 6%, 7%, and 10%. it all depends on the stock and your level of comfort.
goosemeister@hotmail.com
