How to Set a Stop Loss on Fidelity

Setting a stop loss on Fidelity is a crucial strategy for managing risk in your investments. A stop loss order automatically sells a security when its price falls to a specified level, helping to prevent further losses. Here's a detailed guide on how to set up a stop loss order using Fidelity's trading platform.

1. Log in to Your Fidelity Account

   • Visit Fidelity's website and log in using your credentials. Ensure you have an active trading account with sufficient funds.

2. Navigate to the Trade Tab

   • Once logged in, go to the "Trade" tab on the top menu of the Fidelity homepage. This will direct you to the trading interface.

3. Select the Security

   • Enter the ticker symbol of the security for which you want to set a stop loss. You can also search for the security by its name if you’re unsure of the ticker symbol.

4. Choose the Order Type

   • In the order entry screen, select "Sell" as the action. Then, choose the "Stop Loss" order type from the available options. Fidelity also offers a "Stop Limit" order if you prefer to set a limit price in addition to the stop price.

5. Enter Stop Price

   • Input the stop price at which you want the stop loss order to trigger. This is the price level where the system will automatically sell your security to limit losses.

6. Specify the Quantity

   • Enter the number of shares or the amount of the security you wish to apply the stop loss order to. Ensure this matches your holdings and desired risk management.

7. Review and Confirm

   • Review the details of your stop loss order to ensure accuracy. Check the stop price, quantity, and other order specifics. Once confirmed, click the “Place Order” button to execute.

8. Monitor Your Order

   • After setting up your stop loss order, monitor it through your Fidelity account. You can view the status and make adjustments if needed.

Tips for Setting Stop Loss Orders:

• Adjust Regularly: As market conditions change, you might need to adjust your stop loss levels. Regularly review your stop loss orders to ensure they align with your risk tolerance and investment goals.
• Use Trailing Stops: Fidelity offers trailing stop orders which adjust the stop price as the security’s price moves. This can help lock in profits as the price rises while still providing downside protection.

Common Mistakes to Avoid:

• Setting Stop Prices Too Close: Setting your stop price too close to the current market price may result in premature selling due to normal market fluctuations.
• Ignoring Market Conditions: Ensure your stop loss levels are set considering current market volatility and trends. Avoid setting unrealistic stop prices that might not reflect the security’s volatility.

Advantages of Stop Loss Orders:

• Risk Management: Stop loss orders help limit potential losses by automatically selling a security when it reaches a certain price.
• Emotional Control: By setting stop loss orders, you reduce the emotional stress of managing trades and can stick to your pre-determined risk management strategy.

Disadvantages to Consider:

• Potential for Premature Selling: In volatile markets, stop loss orders might trigger at unfavorable prices, leading to potential losses.
• Does Not Guarantee a Fixed Exit Price: In fast-moving markets, the actual execution price may differ from the stop price.

Conclusion: Setting a stop loss order on Fidelity is a straightforward process that can greatly enhance your trading strategy by managing risks effectively. By following the steps outlined above and considering the tips and common mistakes, you can better protect your investments and maintain a disciplined trading approach.