You may have experienced the internal turmoil of “Do I hold on to a stock if it’s dipping? How long should I hold? Maybe I should’ve sold it. Oh no, I should’ve sold it a week ago”. You no longer need to ask these questions!
Learn about our risk management tool, stop loss and stop gain criteria, and start getting notified about your stocks, on your terms!
What are Stop Losses and Stop Gains?
Both can make managing risk within a portfolio easier. Let’s talk about what they are.
What is a stop loss? A stop loss is a method to limit an investor’s loss on a security by selling if it drops by a pre-set price or percentage.
What is a stop gain? A stop gain is a method to sell a security you have already bought, and make a profit, if it reaches the certain specified price or percentage you set, before a potential dip.
Simply, for a stop loss you choose the limit on how much you are willing to lose on a stock before selling it. For stop gains, you choose at what point you are happy with your profits and want to sell before the security potentially sees a dip.
How do these “stops” help manage risk? By using these stops and receiving alerts for them, you get to specify your risk tolerance. If a stock drops by 15%, or if a stock gains 25% you can receive alerts that eliminate personal calculations and the anxiety of wondering what you should do in the moment. This is one of the many things our software has to offer.
They are commonly used when numerous stocks are being evaluated simultaneously, and you don’t have the time or ability to be constantly scanning all of them. Using stop losses and gains can also lay down a consistent strategy for what you want. You can choose between negative or positive expectations, whether 15%, 5%, 25%, or more.
An Analogy for Stop Loss and Stop Gain
Still trying to figure out the benefit for you? Let’s go through an analogy to elaborate more.
Jennifer has a newly acquired lemonade stand and is figuring out her risk tolerance and price expectations.
She sells lemonade for $2 per cup. With inflation, however, a volatile market, and uncertainty with vendors, she sets expectations for how little and how much she is willing to sell her lemonade.
The lowest price (stop loss) is $1.50; the minimum for her to make a profit.
The highest price (stop gain) is $2.50, because she doesn’t want to scare away customers with too high of prices.
Jennifer stays informed throughout the year, receiving alerts when the prices reach the criteria she set. If they get to $1.50, she knows profit will decrease, but she will still have enough money to continue running the business, and the stand won’t lose money. If they get to $2.50, she knows her profits will increase, but doesn’t have to worry about scaring off her customers with higher prices.
Real stop loss and stop gain limits will tell you to sell because of a security’s low or high performance.
Stop Loss and Stop Gain Limits in Equities Lab
Want to apply this feature to your already extensive screeners and watchlists? It’s simple! Once your desired high-achieving formula has been executed in Equities lab, it’s time to put in your stop loss and stop gain limits.
Go to the Trading Rules tab (next to Overview, for your watchlists), click on “add stop loss”, then choose your criteria. Next click on “add stop gain” and choose your criteria. It’s as simple as that!
Once you have your limits, hit “Save”, then refresh, and click “Go” on your watchlist. Now your new criteria are in the system and working for you. (You can specify which stocks you will buy (or have bought), and those added expectations will tell you when to sell based on low or high performance.)
If this is your personal watchlist, the software will tell you to sell when your stocks don’t match the criteria for the limits you set. You will be alerted on your personal watchlist located on the home page.
Takeaways
Incorporating stop loss and stop gains into your watchlists takes minimal effort and will help you make future decisions with your expectations. It helps take out the emotional and stressful parts of trading. You can use Equities Lab to maintain the criteria you want with the simplest of features. Get started today!