STOP LOSS : NEEDED??Uncategorized
So, here we are going to discuss that “STOP LOSS : NEEDED??” for taking different trades. Prime function of STOP LOSS IS “PROTECTING THE CAPITAL”. If one is capable of making good money management, then market can never be able to put you in loss. Definitely, there will be days, when you close your trade in loss, but at the end of the week/month/year you will remain in profit. SL helps you in booking small loss instead of book a huge loss. Yes, you read it right, booking a loss.
You have to respect the market and its all decisions, you can never go against it, so respect it decision, if it is giving you loss, than you should be fully respect the market and book it. Don’t try to resit it and make it a matter of ego, that you can never be in loss as your trade setup cannot be fail, even you select it as per market trend and take the trade accordingly.
Here, we discuss some methods to put SL in Intraday trade:
A ) Multiple stop loss rule for Intraday:
If 3-4 stop loss hit occur in single day trade, don’t go for another trade. (3-4 depends on your SL to Target ratio)
Reason : Considering SL to Target ration as 1:3, hence forth if 3 trade hit SL then loss will be x+X+X=3X
And if 4rd trade hit the target, as per ratio of 1:3, therefore profit will be 3X.
Henceforth loss of first three trade i.e. 3X will be managed by fourth trade viz. 3X.
Here, you can stop after fourth loss. 4 losses or more as per your profit to loss or SL to Target ratio, which could be 1:1, 1:2, 1:3 or so on.
B) Multiple SL type II: Generally we find the resistance or support zone, instead of a point for Resistance and support, hence if you able to find a zone for your SL, then you should put SL lot wise. For e.g., if you buy 100 scrip, you can put the SL by 50 scrip first, then 30 scrip and at last 20 scrip. Sometimes it helps to hit your SL by the tail of the candle. http://www.mynsetrade.com
C) Stop loss amount for a day:
Always have a target for SL on day basis in which specific day you are trading for e.g. on expiry day, event day etc., specially when market is volatile a lot and stick to it always.
E.g.: If capital is Rs. 5,00,000.00, then SL for a day is max 5% i.e. Rs. 25,000.00.
Therefore if in a day Rs. 25,000.00 loss occur, then trade to be closed for the day.
D) Trailing Stop Loss:
Always lock the profit once done.
For e.g. Buy @ Rs. 100.00, SL @ Rs. 95.00, Target@ Rs.110.00 Qty 200. SL to Target ratio 1:2.
Let stock move to 105, then trail the SL to 105, then lock the profit.
And at least for 100 qty to be lock.
E) Don’t put SL on your mind, always put it on system, specially when you are not always available to the market to watch it. Consider, if stock moves opposite to your calculation and you left the position open and not available in front of system, lets assume you come after 2 hour, you never think/predict how big a movement could be.
F) Wait for the time period on which you take the decision of buy/sell.
My own experience 20.06.2019, I short Jet airways share at Rs. 28.60 with a SL of Rs. 30.00 (still to high, as stock is falling at a very high rate of 30-40% per day, due to no progress in the recovery process and CoC going to NCLT). Stock moves to Rs. 27.80, but I stay in the trade as my target was Rs. 27.00 . But can you believe, the stock jump to Rs. 82.65 high, and close around Rs. 62.85.
My SL hit and my loss was Rs. 1.40 per scrip just because I have put SL. Otherwise you can not even imagine that how big loss it could be and it will be next to impossible to recover soon. http://www.mynsetrade.com
SL saves YOU. You can also check https://nsestocktraders.blogspot.com. ttps://nsestocktraders.blogspot.com
(Even SBI led CoC get the nod of NCLT on the same day at 05.00 p.m. and delivery on that day was around 3.5 % only, so you can think yourself that anything could be possible with any stock on any day, there could be any reason for the same but that’s not our concern, our primarily concern is to save our capital only).
Here is the chart: Check Yourself “Stop Loss : Needed??.”
Now you should answer to yourself “STOP LOSS : NEEDED OR NOT??.”