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Cut Loss Strategy in Stock Trading and Investment

When trading and investing, you need to develop a reasonable mind. Gathering decisions based on anger, has the potential to lead to great losses. One of them is related to the decision to implement a cut loss (CL).

The CL strategy is an effort you can take to minimize losses. Even so, you can also practice this strategy to get profits in an unchanging way. Value means, you know the right moment to do stock marketing.

What is Cut Loss?

The term Cut loss or CL must have been very familiar among stock investors and traders. Literally, this term consists of 2 words, namely cutting and losing. In practice, stock investors and traders carry out CL with the aim of reducing larger losses.

CL refers to a situation when you sell a stock at a selling price that is lower than the purchase price. In that atmosphere, you will indeed face loss. The decision to market shares at a small price, you do to minimize the loss of the impact of a sharp dip in stock prices.

Obeying CL is a must strategy that must be applied by every trader and investor. The goal is to secure capital when a financial emergency occurs or unexpected events arise that have an impact on stock price depreciation. Therefore, cut losses often get the title as a protective stop strategy.

Duration of the Cut Loss

After knowing the interpretation of what CL is, you need to know the right time to do it. Things you need to pay attention to when practicing the CL strategy, collecting decisions to sell shares is not always correct. Moreover, reliable traders have a win-loss ratio in general at a value of 60% to 70%. So, you don't need to be afraid of making the wrong decision collection.

As an estimate, there are 4 situations that you can use as the right moment to do CL, namely:

1. Point Loss Percentage

When trading or investing in stocks, you need to first determine the percentage point of loss. The amount of loss that can be guaranteed by a trader or investor varies. So, you can't use the loss percentage of a reliable trader or investor as a barometer.

There are people who think a loss of 3% to 5% has given a big emphasis and created stress. On the other hand, there are traders and investors who can sleep soundly even though they have faced losses of up to 10%. So, the view that you can use as a barometer is a psychological situation.

2. Atmosphere that Urges Stock Price Depreciation

You may have carried out elementary and technical analysis of industry-specific stocks. As a result, the industry has positive capabilities. However, the atmosphere in the capital market does not always run smoothly. It's possible that the industry is facing a case as a result it doesn't have a maximum performance.

In such a situation, the number of industrial shares you own will face a decline. In that condition, the best decision you can make is CL. Keeping stock of a troubled industry is a bad decision. If it is continued, it is possible that you will run out of all the totality of the capital budget.

3. Mistakes in Buying Shares

In special cases, it is possible for you to make a mistake in buying shares. You buy shares that incidentally are not needed. The triggers for the formation of errors are quite diverse. One of them is when you do business in a hurry without being accompanied by a method of analysis.

In this kind of atmosphere, the best method you can go for is to trade it. Moreover, when you look at the movement of stock prices that lead to minus. The option of doing a cut loss is a reasonable alternative to avoid bigger losses.

4. JCI Corrected

Finally, you need to consider selling shares at a small price when you experience a corrected JCI. When there is a corrected indicator event, you need to make careful observations. Make sure that the emendation or weakening of the stock numbers goes the umpteenth way or not.

When a stock indicator faces emendation, you also need to identify the factors. Some of the factors that contributed to the formation of stock emendations, among others, are emergencies, rumors in the country, chaos, and the like.

Well, that's the interpretation of cut loss in trading and stock capital that you need to know. I hope it's useful, right.