How to set up a reduced loss posistion

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1

Hi I just wanted to find out, say I had an open position currently at £200 in profit but I wanted to set up an automatic sale if it fell to £150 profit how would I do that?

Thanks

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Follow this example:

you buy 10 shares at £50 price per share = £500 total investment

if price per share goes from £50 to £70 your 10 shares are now worth £700

(10 shares at £70 each = £700)

If you want to lock in at least £150 of profit:

£500 (initial investment) + £150 (desired profit) = £650 (minimum total value of investment you target)

You can do £650 / 10 (shares you own) = £65

£65 is the price you can set your stop loss at - or slightly above / slightly below as desired.

In other words if price per share falls to £65 - take me out of the trade. Therefore, ensuring that your profit doesn’t fall (much) below £150.

The formula would look like this:

((number of shares x average price) + desired profit) / number of shares = your stop loss price

And you can calculate it in this order:

  1. number of shares x average price
  2. result from step 1 + desired or minimum profit
  3. result from step 2 / number of shares

This gives you the price you should set your stop loss at to ensure that if price goes against you, you lock in approximately (depending on where you actually get filled) your desired minimum profit.

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