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konil - Sat, 24 Dec 05 :

or if you don't want to get taken out through an adverse movement, don't use a stop loss - but that means you carry far more risk.

but the advantage is that with a sb you can take a short position as easily as a long position, to go short just open a 'down' bet.

edit: can also use it to hedge long positions, so for example, if you hold a stock but expect a short term downward movement then instead of selling it you can open a down bet, this will go into profit if sp does go down, counteracting losses on the stock holding, whilst at the same time avoiding the hassle and costs of having to sell the stock and buy back later and also preserving any tax benefits eg. the 2 year holding period that reduces cgt for aim stocks.


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