Stop Loss Order

There is a tradeoff to using stop losses

• Sometimes they help - you lose less than you would have otherwise
• Sometimes you end up being stopped out near a bottom and miss a recovery rally
• Research from MIT processor Andrew Lo and PHD student Kathryn Kaminski shows mixed results
• For some strategies stop losses help, but for other strategies they hurt

Tips on How to Best Use Stop Losses

• put it far enough away from current prices to allow for the markets/stocks normal day-day volatility
• If the stop loss is too close, you might get stopped out too early/frequently