Fellow traders most of the time you might have heard to trade with a stop loss. I relate stop loss to buying an insurance for our uncertain future.
Strange to me that most of the experts or analysts tell you to keep stop loss but 85% times people do trade without stop loss ( Source SEBI reports )
What makes it so difficult that people just can’t keep it.
- Over exposure : If you speak with any broker and ask him what is the first question a trader ask while they meet them first time to open trading a trading account. They will answer that they ask for the ” How much limit or exposure they they can provide on their margin.”
The fortune of the that trader sealed on the same day ( from that very first day a time bomb start ticking against the wealth of the that trader. Sooner or later that is bound to explode)
When a trader trade with such a huge exposure if any trade start going against that trader that leads to huge dent on his corpus amount that he tend to become mentally paralyses. That further leads to disaster.
- We as a human programmed not to accept our defeat, that is the core our our evolution we are able to survive because of this mental coding. You might have seen so many people coming back to market after loosing everything in market. So due to this it is very hard for us to accept that we lost in a trade. So we keep on waiting for trade to return in our favour.
- Booking looses is an art that need rigorous training. I remember one of my trading guru saying that if your success rate is more then 60% means there is something terrible wrong. In bad market we should loose money like we make money in good market.
- Traders always aim for holy grail in trading. They think that will be the answer for all their hardships they are facing because of trading financial markets.
Good concept. How to decide the stoploss ? Is it nearest lower support in case of long and nearest higher resistance in case of short trade ? Please advise. Thanks.
It should be part of your trading strategy !!