Question

Arianna just made another fantastic​ investment: She purchased 400 shares in Great Gains Corporation for ​$20.0920.09 per share. Yesterday the stock closed at ​$54.1254.12 per share. In order to lock in her​ gains, she has decided to employ a​ stop-loss order. Assuming she set the order at ​$53.7353.73​, what is likely to​ happen? Why might this not be a wise​ decision? At what price would you recommend setting the​ stop-loss order?​ Why?

Answer 1

Answer:

1. Likely the price of the stock either goes up or falls

2. There is no need for a stop loss order in this scenario.

3. 5412541.2

Explanation:

1. Stock market prices are often  unstable, prices can be up today, the next day they are low.

2. Arianna has already made over 100% profit from the stock since she purchased at a good low price, yesterday's stock close price was still profit for her.

3. A 10% Stop loss price would have been the idea order price rather than the ​$53.7353.73​.

4. Remember Stop loss order are meant to reduce or minimize the loss of investor or trader, a calculated level of  should be carefully decided.