Two tools that promise to be the key to not losing money: Stop Loss and Take Profit. The Stop Loss to automatically limit your losses (goodbye, worries!) and the Take Profit to secure your gains (hello, luxury life!). Example: You buy Apple shares at $150, set your Stop Loss at $100 and your Take Profit at $250, and that's it, live life while the market works for you! The idea is to free yourself from the tyranny of the screen, letting your trades close automatically when the desired levels are reached. Sounds so simple, right?
But here is where the plot thickens: while it sounds simple, "most people do it wrong." Why? Because its use "depends 100% on the method being used to trade." For speculators using leverage, these tools are a vital necessity, a safety belt that prevents total ruin with a single failed trade. However, for true investors, those seeking to buy "good stocks or companies" and hold them long-term, the story is very different!
Here comes the unexpected twist: for investors, Stop Loss and Take Profit are "designed to do the opposite of what we seek." We are told that a Stop Loss would force us to sell our shares right at the moment of a temporary drop, when we should be buying more! And a Take Profit would make us sell a "good stock" when it is doing exactly what we want: growing! There are examples of people who sold Apple or Facebook shares after a rise, only to see them double several times more.
In summary, what promised to be your shield and sword in the market could become your own trap, especially if you consider yourself a long-term investor. So, before scheduling those automatic closures, ask yourself: are you a speculator looking for a quick hit, or a patient investor seeking long-term growth? Because the answer to that question could be the difference between a strategic ally or a silent saboteur of your fortune. Beware of tools that promise simplicity; they might be hiding a complexity that only true experts understand!
