Hello again,
Well i personally don't trade stocks that much, i trade forex.
But Stops are a common thing.
Well if you think that stops are a thing for small losses or a reason for loss, you are wrong.
No trading system is perfect so when you buy a stock and expect it to go up,there is still a chance it may go down,but you will not always be there in front of your screen, so if it goes down it will save you your money.
So the point is, i know xyz is going up, but what if it doesn't,if there was no stop order and stock went in free-fall your account will be wiped out.
Take Same example as above:
Price 10 loss 0
Price 9 loss 100
Price 8 loss 200-------------------------------------Price 1 loss 900.
See if you had a stop you were saved at 100 loss, not 900.
It is for contentment of mind that i won't loose more then the money i know.
And i won't win more money then i want.
In investment you don't go for short term,if you knew after 10 years price of xyz willl be 100 rs will i be worried and place a stop at 7 Rs.
No i won't be worried,but still i will place a stop at 7 Rs as a calculated risk.
Hope this helps.
Regards
Taz