The market capitalization of our largest exchange, China’s BSI, is estimated to be $9.9 trillion, with a market capitalization of nearly $2.5 trillion. In addition, the world’s largest Chinese bank, CITIC Bank (China’s largest private investment bank), is worth $37 billion.
We believe that the use of stop losses would be cost effective and beneficial. The BSI is currently trading, with the most recent price just after the recent market decline. A stop-loss would be available if the market fell from $100, or the volume from a certain order at $1 or below was greater than a one-trick pony trader could create for himself.
The use of stop losses would eliminate some of the risk associated with trading. The stop-loss would allow the customer to continue on, at least for a night, without having to worry too much about the trading. For instance, a stop-loss would be available at $200 for a client who needed a larger stop-loss order for an existing position than the price of the commodity being traded. An investor would therefore have the option to purchase the commodity in the open market, sell it, return the capital to his account and continue on with his current daily trading. The trade would be completed at the next close.
However, if the market had fallen into the neighborhood of $800 as per the chart below, when most traders consider selling off stocks, a stop-loss may make sense. Thus, by increasing the quantity of the order book a potential investor would have the opportunity to take advantage of the price falling further before he would be in a position to make a trade. Thus, the increase in trading volume would add to the potential trading profit. To be effective stop-losses should not be set at more than 10 percent of the total volume. The cost of implementing an effective stop-loss would be in the range of the cost of the order book.
Is stop-loss trading illegal?
Stop-loss trading does not violate any laws pertaining to foreign exchange, currency trading or derivative market manipulation. This is because the trading of commodities is a legal activity in the United States, which requires a license. However, there are laws pertaining to derivatives and currencies and stop-losses in the United States should be considered as legal activities which may not be subject to U.S. regulations.
Stop-loss and stop-gap trading strategies are used by professional and amateur traders.
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