Case Study :Unable to Exit When SL Hit

By | June 5, 2021 1:20 pm

Today I  am Sharing a Case Study on One of My Student during our 1×1 Coaching How we undestood his Trading problem “Unable to Exit Position when Stop Loss is Hit” I decided to highlight these specifically, as I’ve found there are a number of common themes amongst struggling traders who I’ve worked with. Hopefully, by detailing their challenges and offering some action points, you too can take something away from this article and improve your trading.

Shirish was an excellent Trade, Loved to trade Hit Beta and Volatile Stocks and had a Knack to the direction right in “MOST” of his trades. Shirish wasn’t really losing money but was not making big also. He would trade very well 80 percent of the time. But then when it traded against him he simply could not pull the trigger and exit the bad trades. In turn, he would wipe out all of his gains from his last 5 trading days.

Shirish loved to Trade Bajaj Finance a Highly voaltile stocks and he would be right in catching the direction and trend most of time but when the Stocks starts trading against him he do not know where to Exit and always think Stock will come back to his entry and he will Exit. Due to high leverage he used to take he used to give gain of last 5-6 trades in single loss.

We worked with Shirish on Exiting stocks that traded against him. We first started with the simple instruction,

“Shirish , if a stock trades against your SL price, then EXIT it please.”

We observed his trading the next day and  noticed he had opened up a position at 5900, I would ask, “Hey Shirish , what is your exit price for Bajaj Finance?”
He would tell ,“5850 is my exit price .”

Ten minutes later, I would notice Bajaj Finance at 5820 and Shirish is still holding on to his trade.

“Hey Shirish , I thought your exit price was 5850?”
He Told he thinks price will come back up so held on to it. He was unable to follow his own trading plan.

So I would ask, “Shirish , where are you going to EXIT Bajaj Finance if it does not go back up?”
“Sir , I am gonna exit as soon as it start trading below 5800.”
Ten minutes would pass. Bajaj Finance would trade went upto 5850  and then back down. I observed Shirish,he  had not sold Bajaj Finance into the upmove ie. at 5850 . And in fact, it was now lower price went below 5800 his last SL.
I asked “Hey Shirish , isn’t Bajaj Financelower now?”
“Yeah, I should have Exited it,but i am unable to.” I forced him to Exit the trade.

Basically Shirish HE WOULD NEVER SELL. It was like he was the great Warren Buffett and just did not believe in selling.

We offered visualization drills to help him solve this mental block.

This is a common problem amongst traders Unable to Exit when your positions hit SL. You must work at this. During our trading courses We runs our students  through extensive drills  to instill the habit of EXIT stocks that trade against you.

We reviews all trades and  traders must explain why. If they fail to EXIT a stock that hits their exit price.

If you struggle with this issue, start with this simple visualization exercise.

Find a quiet place. Concentrate on your breath. Breathe in and out deeply. Concentrate on your breath flowing through your body. After a few minutes, start to visualize your trading station. In detail, recreate the sounds and visual stimuli you encounter while trading. Picture yourself long in a stock that you trade, with a predetermined exit plan. Imagine this stock trading against you, and see yourself hitting the bids. Pick another stock and repeat this process. Feed your mind with the ability to immediately hit stocks that trade against your price.

There are some traders who just cannot admit that they are wrong. They develop a bias about a stock. When the stock does not trade as they expected, they are paralyzed. They insist that the stock will start acting as they expected, and refuse to exit their positions. As I’ve explained earlier,
successful intraday traders exit losing positions quickly. They are not emotionally invested with the market, proving their thesis correct about a stock.

Developing a bias can be helpful when trading a stock, but when the price action contradicts your theory, then you must exit.

Consistently profitable traders are interested in making good trades. They accept that they cannot control the results. And holding a position that is trading against them because they are most interested in being proven correct is bad trading. Your job is not to be correct. Your job is not to make money. At the best prop firms, a new trader is taught to just focus on making good trades.

Below are few more Case Studies we have shared, Go Through them and Improve your Trading

Trading Student Case Study: “I am a loser!”

Trading Student Case Study: “I QUIT!”

Case Study:How to Improve Trading Behavior

Case Study II :How to Improve Trading Behavior

Case Study: How Emotion affect Trading

How to Improve Trading Behavior

Leave a Reply