Understanding The Stop Loss In Stock Trading

Share markets are very volatile. There is a huge risk when you invest in the share market. The investor gets emotionally attached with the stocks he has invested. When the stocks are moving up, the emotion does not cause any harm. But when the stocks move down, it leads to the losses. As an investor you cannot bear more losses. There is some point at which the stock is expected to move further down causing you more losses. Hence it is wise to selling the stock limiting the losses. It is often found that investor keeps the stocks in a hope that they will rebound. This is why you should use stop loss when you place the order.

What Is Stop Loss?

Stop Loss is a trigger price beyond which the stocks and hence their losses should not be bear. The stop loss is known as the emotion remover. Using Stop Loss is one of the most suggested ways to invest in the stock market.

For example say if you are buying 100 shares of company ABC which is 3000INR/share when you are placing the trade. You expect the share price to go up. However, the share price of company move the other way. Let us say you can afford the losses only to 50INR per share. When you enter the stop loss in the order, the stock gets converted to a sell once the price reaches your stop loss. Once the stock moves below this price, the stock is sold thereby limiting your losses. The same principle holds good when you want to short the share. 

BSE, NIFTY At All Time High , IT crumbles, Why?

As an investor, you should be very careful about everything that can affect your stock. 

When the BSE Sensex and Nifty Have reached the all the time on 07/03/2014, there are few things that needs to be watched on? When the BSE Sensex has moved by 400 points, there are few stocks which have crumbled. These are basically the IT Stocks.

Why Did IT Stocks Fall?

IT stocks have been riding high since past almost a year. Infosys has reached its all-time high and so is TCS, HCL and many more IT companies. But on this day, when almost the entire was in the green, these stocks ended in huge red. There are few reasons which matter in IT stocks. This article covers one of the important factors that you should check while you invest in IT stocks. This is the first tip to invest in IT stocks.

Rupee V/s Dollar: 

The reason why these stocks fell today was because of the strengthening of the rupee. The revenue of the IT companies depends on the Dollar to Rupee conversion and on this day this has reached a 3 month high. The strengthening of the rupee would mean lesser revenue to these companies and therefore the investors tend to withdraw and book profits. This is not the only factors but just one of the important factors which when taken care will tell you when to invest in the IT companies. Therefore the right time to invest in the IT companies is when the rupee is depreciating. However, this does not mean that the strengthening of the rupee will always lead to the fall of IT stocks. This is very much true for an intraday day trading provided there are no other factors driving these stocks. 

The blog is dedicate to understand the various factors that will affect the stock market and can be used as an your investment tip.