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What Is Target Price And Stop Loss? July 30 2017Stock Market Trading

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What Is Target Price And Stop Loss?

Stock markets are the backbone of the country''s economy, thus it becomes imperative to have some knowledge about stock trading. Indian is fast becoming one of the emerging markets which have a lot of potential for future growth. With the help of this educational blog, we wish to impart the knowledge of some of the basic stock market trading term and concepts. In this blog, we will focus on, what is target price and stop loss. Let us understand the meaning of both the terms:

Meaning of Target Price

Target Price is referred as the best possible projected price limit for a financial security. Target Price is a limit that is the best possible outcome for the stockholder''s investment. Upon achieving the Target Price, the investors or traders simply sell their stocks, as according to them they have achieved the most probable reward from those particular stocks.

For example, two different stock traders hold the stocks of INR 600. They may have different opinions about the financial profit that they can gain from these stocks. One trader could set his target price at INR 750 whereas the other trader could set the price at INR 1200. Target Price is subject to risk tolerance and the amount of time an investor or trader can hold on to the security.

How to Determine the Target Price

The investors or traders can determine the target price by conducting the technical analysis. Determination of the appropriate price targets can be done by applying many tools and methods such as previous support and resistance, moving averages and Fibonacci extensions.

Meaning of Stop Loss

Stop Loss is that pre-determined price limit which is set to minimise the loss of the stockholders. In most cases, the investors set their Stop Loss order for a brief time period when they are either on a vacation or unable to monitor their stocks. However, Stop Loss is beneficial if the stock market is declining in steady and orderly manner. In case, the stock market is declining in a disorderly manner then Stop Loss could also subject stockholders to losses.

For example, a stockholder has the shares of XYZ Co. which is currently trading at INR 500. To protect himself from a big decline, the stockholder has set the Stop Loss order at INR 480. If the stock value of XYZ Co. is reduced to INR 480 then in this event, the Stop Loss order would be triggered and at the next available price, the stocks of the stockholder would be sold. For instance the next available price of the XYZ co. is INR 479 then the investor''s stocks would be sold at that value.

How to Determine the Stop Loss

As a normal trader or investor, you can set the stop loss at 5% or 10% below the price at which you bought the stocks. However, technical analysts undertake the value of trendlines, swing highs, swing lows, major moving averages or resistance levels before determining the value for any Stop Loss order.

Conclusion

Stop Loss and Target Price are the some of the core concepts that everyone related to stock market should know. Our professional team of experts at Indira Trade walk a fine line to provide profit to our valued customers while also keeping in mind to cut minimal losses if need be. We also offer learning courses to those who wish to gain more in-depth knowledge about the stock market and its economic paradigm. To know more about these courses click here.

If you have any queries regarding Stop Loss and Target Price or you would like to know more about the services we offer, you can reach us via call or email.

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