Buying at low rate and selling at high rate is every trader’s motive.  But sometime market follows the bull trend and sometimes it follows the bear trend.  Trading is totally a game of possibilities and probabilities. And sometimes projections can even go wrong. When the shares follow the declining trend, it’s hard to accept that we are really losing. At that time, every trader has a hope that market will recover, so the stocks. But if this hope doesn’t get fulfilled, then a trader can bear heavy loss as well. So what should be the point where trader should put the stop limit , there are various methods such as:-

1. Hard stop: - Hard stop is a phrase actually. It means that trade will automatically stop when it reaches a lowest level. Such as you had bought reliance infra shares  483.00  at 11.19 Pm. Now you had put the stop loss   @ 20 % when it reaches on 386.40  It means your trade will be automatically sold when shares will strike this rate. This method is quite risky and it’s normally adopted by the beginners  like us

2. Average % stop method: -   In this method , average range is decided of any share. Suppose  the reliance infra which opened on 514 on 28 Apr2012.  And it’s opening rate  is 494.5 on 26 July2012. Now from 30 july2012 to present the share ranged from 477.90 to 490.45. So we can derive from the above analysis that average loss point should range from  0.02 to 0.03 above the price your purchased.(approx.) Please note that I had taken open rates as  base for this method. This strategy is followed by long term traders. As price base is taken form a fluctuation over the period.

3. Multiple day high/low prices: - This strategy works best when shares follow increasing trend over a period of time and then start following diminishing trend. This is the most easiest and risky strategy. In this parameter, we follow the 2 day lowest trend mostly. Suppose  a share’s lowest price is 437.00 and on next day its lowest price is 436.00. So you can easily derive that your stop loss point should be 436.5, and the same can be achieved on candle stick (means a share’s high, low, open and close price) easily.

There are many more strategies and methods which are yet to unfold. And I am also an amateur in this field. So, please let me know my mistakes, if any mistakes are there And please don’t forget to put your suggestion to improve further...

Regards

Renu