Friday, December 17, 2010

Setting Stops

If the stoploss is setup at 5880, then I will wait for the close (for me, it is at 15:20 PM) to decide if the stop is triggered or not. If he price at 15:20 is 5990, then it is not triggered, if it is 5960 - it is triggered. But, if the price is 5979 then I take a sense of the market - is the market likely to move down or up. and then decide. Rarely, I have a stop which is intraday. Then, of course, the trade is stopped out when the price is touched.

On Stops:

Many of our habits are designed to keep us safe. When sitting in a car, I always buckle my seat belt. When crossing the street, I look left and right, then cross. In the same way, when taking a trade, I always put a stop loss in. It comes naturally, without effort.

While successful trading will ultimately be determined by profits, you will not be profitable on every trade taken. Therefore, to make money, your edge must give you a higher probability in profitable trades as compared to the losses suffered in losing trades. For this reason, your losing trades must be restrict your losses. It is for this reason that a losing trade may actually be considered successful if the trade was executed properly.


5 comments:

rocky said...

Hello sir,

Thank you for your words of wisdom about stoplosses, can you please continue this discussion about longing profitable trades and when to exit the same (i.e, how to determine tagerts), which is equally important i guess.

thnx in advance.

Amit R said...

Hi,

I am a regular reader of your blog and find it insightful. Since you raised the issue of stoploss, I would like to ask a silly question. Say you trigger a stoploss of 5980 but market started off on a very bad note and price is much lower than 5980. Do you still wait till 3:20 PM ?

Apologies if the question sounds dumb to you.

Regards
Amit

gourv said...

Hello Sir,

Undoubtedly these points mentioned above by you are priceless.I really dont know how to thank you for yours guideliness given in last few years.This one point about SL has really solved a lot of my trading probelms.Now i wont ever think about quitting my job.I hope you remember my question about leaving TCS for a trading job and because of ur advice i left that thought that day. I am doing and will be doing my analysys in EOD charts and call my broker to place my order accordingly and watch the marker around 3:15-3:25 to decide weather SL is triggered or not.Thank a lot sir.

Regards
Gourav

piyush said...

sir,
suppose you close the day at 5890, and so your stop does not get triggered, but the next day you come and see the market opening at 5800. now what?? shall i ait for the pullback to fill the gap or close my position immediately or wait for 15 or so minutes to see if the market is sliding or has any chances of reversal
thanks

sagar said...

AS JESSE LIVERMORE SAID:
YOU CAN BEAT A STOCK BUT YOU CANT BEAT THE STOCK MKT.............