Percentage vs. Technical Stops

Some traders use a fixed percentage stop; others use chart levels. Here is how each works, where each falls short and how many traders combine them.

Percentage stops

A percentage stop sits a fixed distance below your entry, such as 5% or 8%. A well-known growth-investing guideline is to cut any loss at 7% to 8% from the purchase price, no exceptions. It is simple, consistent and easy to follow, and it guarantees no single position can fall far before you exit.

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