What is the appropriate ratio of take profit and stop loss?
Generally speaking, the stop loss ratio of short-term investors is 5%, the median line is 10%, and the medium and long-term investors can reach 30%. If it is profitable, it can be set at 10%-30%. In the middle, the position can be appropriately reduced to ensure the smooth realization of book profit. No matter how to set the stop loss ratio, we must understand that the capital preservation is the first and the profit is the second.
Comparison between take profit and stop loss
Take profit and stop loss are relative concepts, both of which are selling transactions considering the relationship between risk and return. The biggest difference between the two is that stop loss is to prevent your loss from expanding, and take profit is to prevent your profit from shrinking. The purpose of both is to prevent the decrease of current assets.
Whether it is profit-taking or stop loss, the key to avoiding mistakes is to recognize the essence of the market. That is, whether the market is a bull market or a bear market, a rising market or a falling market. When the bear market can't see the bottom clearly, treat all the gains as a rebound. The core of take profit is "take it when the wind blows" and stop loss is "run when the wind blows". Once the bull market is established, any callback should be regarded as a good opportunity to intervene.
Take profit and stop loss have the following differences and similarities.
1. The psychological basis of profit-taking and stop-loss is different.
Stop loss and take profit have many similarities, but their psychological basis is different. Profit is to overcome human greed. Stop loss is to overcome the "lucky" psychology.
2. The control range of take profit and stop loss is different.
When investing in stocks, the very important principle is to make big profits with small losses. When making a stop loss, we must resolutely control the loss in a small range after it is too short. Take profit is the trend change of the market. Or the sales action taken after achieving the expected purpose. Only when the profit after taking profit is greater than the loss of stop loss can investors make a profit.
3. The operating procedures of take profit and stop loss are different.
Stop loss procedure is simpler than profit. In most cases, as long as a stop-loss signal is issued, it will be executed at 100%. Profit-taking involves many factors such as opening positions, adding positions, reducing positions, chip management and fund management, so it is more complicated.
Take profit and stop loss have the same purpose.
On the surface, the behavior result of stop-loss direct selling is opposite, but the purpose is the same, and they are all protection mechanisms according to the core purpose of risk control.
5. The core of take profit and stop loss is the comparison of risk and income.
Stop loss and take profit are both selling behaviors made by investors when they think the risk is greater than the income.
6. The analytical theories and methods adopted by the two methods are basically the same.
Take profit and stop loss are relative. For the same stock sold at the same time and at the same price, some investors may belong to take profit, while others belong to stop loss. For example, mid-line investors buy a stock at a lower price of 10 yuan. When the stock price rose to 12 yuan, another short-term investor bought again. Soon after, the stock price fell to 1 1.50 yuan, and the market showed signs of downside risk. In order to avoid risks, both of them sold their positions. The former belongs to profit taking. The latter is a stop loss.