Thank you, readers for your response to the Bank Nifty trading problem. The problem and your comments are available here : http://www.sudarshanonline.com/2010/03/reader-suggestions-wanted.html
Broadly, the responses on Thursday evening and Friday afternoon were :
1. Exit immediately, you are on the wrong side of the trade, or,
2. Assume that the current price is your short selling price. Now, put a stop loss and see what happens.
On Saturday evening, some of the responses have come in which suggest:
Keep your short position and you will make money.
Maybe the 'keep your short position' is hindsight, after the RBI raised the repo rates.
When I find that I am on the wrong side of a trade, the best way is to exit the position immediately. Some of suggestions have explained this, and, this is what I do.
Saket has offered another option, which says:
"well the trader shorted the bank nifty at 8500 on 26 /2 the bank nifty brokeout and had a buy signal that was were the trader should have got out.
The trader has already carried a position wth a huge loss which is not prudent but lookin at the trade i would not suggest the trader now to book the loss as the bank nifty has rallied and reached resistance levels and the markets have also rallied to the highs n 5250-5300 are resistance zones so the trader can probably hve a stoploss of 9350 on closing basis"
This is also another way of approaching the problem. For professional tarders, this may be a better method, but for newcomers, this method offers hope while the requierment is of discplined action.
Finally, trading is not a rigorous methodology. There are many approaches to the same problem, all of them correct. The reader contribution has enriched this blog, and, I hope added value to all readers. Thanks.