| |
Another choice is a stop and reverse order. This strategy is where you have a stop order placed at a certain loss point. As the loss point is reached and the first order is attained and executed, a new order is placed. This would be the reverse of that original order. This can be used if you feel the value of the stock is going to move up in value. Although this is a useful option for investing, most brokers are not going to use this as a straightforward order. You would have to make two completely separate orders for this strategy.
This strategy works best when you can identify where the stock is going to move up in value. You might notice an upward trend or a pattern that suggests the stock is going to move up in value. You can work with this special order at this point provided you have an idea of what might happen with the stock and you are certain about how it will move upward. The risk of the order is still vital as it could have further losses if the stock does not go back up in value like you might have hoped it would.
