Economy

Professional trader reveals what you need to know before buying your first stock

9. Tip from the professional trader: no stop prices

Finally, two professional tips for your depot. The first relates to so-called stop courses. They serve to hedge positions and define the price threshold at which shares are automatically sold.

Example: You buy a share for 100 euros and don’t want to lose more than 20 percent. Then you can deposit a stop price at 80 euros in your broker’s system. As soon as the share touches the EUR 80 mark, it is sold and the loss is realized.

Professional trader Boyardan recommends avoiding these stop prices. “With a portfolio with a healthy mix of stocks from good companies, you shouldn’t set stop prices with a long-term investment horizon. If one stock actually does poorly, the other five stocks can still save overall performance. ”

In addition, according to the expert, the weak stock could catch up with the lost return in the following years, which will benefit you again. “If you are still convinced of the stock in the long term, it might be a better alternative to buy the paper if the price is weak. As a result, your initial value drops overall. “

Boyardan is alluding to the cost average effect. Example: You bought 50 shares at a price of 100 euros per paper. Now the value drops to 80 euros per share and you buy 50 now, you have an average entry price of 90 euros.

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