Planning your cut loss strategy ahead of time can help you avoid excessive (or minimize) losses and exit your position before it is too late. Set your protective stop using the following conditional orders:
- Stop Limit. Limit your loss in case the price plummets or goes below the support by selling using Stop Limit.
Suppose that you have 10,000 shares of Stock XYZ. You want to cut loss as soon as the price goes below the support. You can instruct the system to post a sell order if the price goes down to ₱51.75 (your Trigger Price). To increase the chance of all of your shares being sold, consider making your Limit Price lower than your Trigger Price.
B. Order-Cancels-Other. You may use OCO if you want to sell your shares in case of a breakdown, but still want to sell at your target price in case the price rallies instead. OCO can protect your trades against whipsaw movements or sudden switches in price direction.
Using the previous example, you can instruct the system to post a sell order if the price:
a. Drops to ₱51.75 (your Stop Limit Trigger Price), to be filled at ₱51.50 (your Stop-Limit Limit Price), OR
b. Breaks out/increases to ₱55.25 (your LIT Trigger Price), to be filled at ₱55.00 (your LIT Limit Price)
Note that setting limit prices below trigger prices increases the chance of your order getting filled.
C. Order-Triggers-Other. What if you already have shares of Stock XYZ? You can still take advantage of dips by selling at the last price, then buying back shares once as the price goes down using OTO. This can be used by investors who want to average down.
Using the previous example, you may set the primary sell limit price at the last price (₱52.75), and the secondary buy limit price at ₱50.5 (below your sell price). Your primary sell order must be fully filled first before your secondary buy order will be posted.
