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When you buy stock and are able to set a stop loss of up to 95% of your initial investment. This would mean if I buy stock for $100, which then skyrockets to $1000 but then drops to $100, no stop loss is triggered, despite a 90% drop in investment value.

Is there a way to set a stop loss as a percentage of the value of the stock at the current point in time, rather than the initial investment only? i.e. automatically sell if the stock drops more than 15% of the highest point?

And if it's possible, is it wise?

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  • I guess that's called a "trailing" order. I would say they're not wise in the sense that: you're either a real day trader and it's all about money management and volume, or, you just buy an S&P index and relax. There are no "stock pickers", if you try to be a stock picker you've already lost. Things like trailing orders, stops etc are "fake security blankets" - just one man's IMO :O – Fattie Jan 25 at 12:25
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    If there is a 90% plunge what makes you think you'll be able to sell when no one is buying? I saw on comment on this site once that went something like "If your house is worth one million dollars you will have a hard time selling it to someone while it is actively on fire." – MonkeyZeus Jan 26 at 15:21
  • The idea would be to try to sell if there is a 10-15% drop, rather than waiting till the damage is done. I was curious though if a sell order actually guarantees a sale... – Timmah Jan 27 at 21:11
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If your broker offers it, you can place a Sell trailing stop order. It sets the stop price at a fixed amount below the market price with an attached "trailing" amount. As the market price rises, the stop price rises by the trail amount, but if the stock price falls, the stop loss price doesn't change, and a market order is submitted when the stop price is hit. This technique is designed to allow an investor to specify a limit on the maximum possible loss, without setting a limit on the maximum possible gain. "Buy" trailing stop orders are the mirror image of sell trailing stop orders, and are most appropriate for use in falling markets.

You can also set a Trailing Stop Limit Order.

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  • The Trailing Stop Limit Order is wiser than the basic Trailing Stop, because if there is a flash crash, you won't be taken out of your position at some horrific loss. Instead, the sell order simply won't be filled at that limit price, which is a good thing. You don't want it to trigger in some gap-down situation, only in a normal decline. Another point: any kind of trailing stop will take you out of the market sooner rather than later - is that what you want? What is your plan to reenter the market? If you don't have a plan, forget the whole thing. – Orange Coast- reinstate Monica Jan 27 at 6:19

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