The Importance of Stop Loss – Supermax Corporation (7106.KL)

One of the most important things in trading is risk management. Setting stop losses can protect trades from becoming investments and investments from becoming headaches. Successful traders of course have good strategies which give them profits, but they also cut their losses short when the trade goes against them.

The importance of stop loss is illustrated well in the chart above. A good stop loss helps trader to avoid further losses or from positive trade to negative trade. Below are the 2 important guides to setting stop loss based on Volume Spread Analysis:

1. Market Stages / Structure – Supermax is in stage 3 (distribution) during the 1st Exit on Red HeatZone

2. Sign of Weakness at resistance level – Supermax unable to break through the previous high and formed a weakness signal (UT) on 28 August 2018