Reaching a Stop Loss

A stop loss is simply a price that you will sell at if the price drops to this level. In short, it is a question of what you are comfortable to lose on this trade if the decision process is wrong. Generally, 10% is used. If you are investing in 5 companies and 1 goes down by 10%, then you have lost only 2% of your portfolio. And if you make 5 or 10% on the other shares in the same time, you will still make a good return.

A floating stop loss is a safety net and all professional investors use one.

A floating stop loss tracks the price of a stock after you purchase it. Whenever a new high is reached it becomes the bench mark. If the price falls by the set % from that high then the alert is triggered. For example, the stock shown above reached a high of $1.00 then fell to $0.88. At $0.90 the FSL would have triggered, assuming that the default 10% setting was used.