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Is it a good investing strategy to always to execute a "stop loss" on a stock at the purchase price so that you can go and quickly repurchase at the lower price the stock is moving too? Logically to me this makes sense, but not sure if this is considered overly risky or bad practice. I understand the even with a stop loss I may not get my exact request, but still sounds like it may worth doing.

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    And if your stop-loss executes because of some flashdrop and by the time you are ready to hit the button the price is up from where you originally sold it? You lost money on the difference, commissions, and got stuck with a wash sale. What's the gain here?
    – littleadv
    Dec 12 '14 at 9:13
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    Also, if your purpose is to make money why would you be chasing a stock that keeps falling? A stop loss should be used at a point where if the price drops to, you realise you were wrong about the price movement and decide its time to get out to protect your remaining capital.
    – Victor
    Dec 12 '14 at 9:25
  • yes makes sense. i actually have 150 trades so commissions are not an issue at this stage. but i see your points.
    – ih123
    Dec 12 '14 at 17:44
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    If the stock gaps down by a wide margin then you may have a problem here you do realize right?
    – JB King
    Dec 12 '14 at 23:25
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    Your purchase price is essentially a random number from the market's perspective. Nobody but you know about it and there is no reason why it would work better as a stop level than a properly devised price that takes the stock's characteristics into account, for example its volatility.
    – assylias
    Dec 13 '14 at 23:08
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You will lose out on your spread, you always pay a spread. Also, if you are looking at a strategy for using stop losses, try taking into account the support lines if you are going long. So, if the stock is on an upward trend but is dropping back from profit taking, your best best is to take a position closest to the next support line. You place your stop just below the support. this will give you the best chance of a winning position as most technical analysts will have looking towards the support as a buy back area. Obviously, in a bear market the opposite is true. If you have taken your position and the market move past the first resistance line, then bring your stop to just below that line as once resistance is broken, it then becomes support. You then have a profitable position with profit locked in. Leave the position to break the next resistance and repeat.

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