How to limit your loss in stock market.

When stock market very volatile and there is a big possibility to go downward, you want to protect your stocks position from loss. There are many ways to limit your loss in stock market.

Difficulty: Moderate

Instructions

1. Buy put option.
   By buying put option you protect your long stocks position. There is a premium that you pay at front to buy put option and the premium price depend on the strike price and the expiration date.

2. Buy put option when the stock price spike in the downtrend in order to buy it with low premium price. Thinks of it as buying insurance to protect your stocks position.

3. Set stop loss order in your account. Which mean if the stock go down below certain price it will sell automatically.

4. Set trailing stop order. Meaning if the stock keep going up it will stay on your portfolio, however if the stock goes down at certain point or percentage from the highest price then it will automatically sell it.

Tips & Warnings

• Talk to your broker about different strategy to limit your loss or to protect your portfolio.
• This article just for information purpose only and doesn't provide any financial advice.

[dsarokin]

on 9/28/2008 Tough times in the ol' stock market these days. These strategies seem like they could really help. Thanks.