How to Properly Set a Stop Loss in Your Robinhood Account
There are many different aspects to Robinhood, from checking your portfolio and watching the market in real-time, to buying and selling stock based on technical or fundamental analysis. One major aspect of Robinhood you should be aware of is setting stop loss orders. In this guide on how to set stop loss in Robinhood, we’ll walk you through the ins and outs of setting the right stop loss order so you know how to make money in the stock market consistently and safely.
What is a stop loss?
A stop loss order is an order that automatically sells when the price of an asset falls below a certain point. A stop loss, or stop-loss order, is designed to limit an investor’s loss on a stock that starts trading poorly. This type of sell order is often used by traders who believe they may not be able to watch their stocks as closely as they would like and want to protect against large losses due to volatility. The stop-loss order guarantees that if the trade goes south, there’s at least one level the trader will not go below. Once it hits this level, the trade will be sold without any additional input from the trader.
How do you set a stop loss in Robinhood?
You’re probably wondering how you can set a stop loss in your Robinhood account. Lucky for you, setting your stop loss is easy. All you need to do is go into the app and tap Accounts. Then tap Margin, which will bring you to the Margin settings page. Once there, tap Position Size and change the number from $1,000 down to $500. Next, scroll all the way down until you find the box that says Stop Loss. Now enter how much money you want it set at–for example, if you want it set at 10%, enter 10%. Finally, hit save so that it’s saved for next time!
What happens if your stock hits the stop loss?
If your stock hits the stop loss, you’ll either get an email or text message from Robinhood with instructions on how to close the position. If you don’t want to close the position, you can cancel the stop loss before it executes and wait for the price of the stock to go back up.
What are the benefits of setting a stop loss?
Setting a stop loss is one of the most important things you can do when investing. Setting your stop loss at 15% means that you’ll be able to walk away from any investment without losing more than 15%. If an investment starts to drop, this will allow you to keep your losses low. Plus, if the stock starts climbing after you’ve set your stop-loss, then it’s time for some well-deserved congratulations!
What are the drawbacks of setting a stop loss?
There are several drawbacks of setting a stop loss. First, the trade is not executed until it reaches the stop loss price; there is no guarantee that the price will reach this level. Second, if the market moves against you and takes your trade out of this range, you have to wait for an opportunity before placing a new trade. Third, setting these tight stop losses can lead to high transaction costs and may require frequent rebalancing. Fourth, by waiting for prices to hit your chosen stop level before executing trades, it’s possible that you’ll miss out on opportunities while waiting for prices to reach these levels. Fifth, setting these tight stop losses could create an emotional response when prices move against you and take trades out of these ranges.