Stoploss Big Mystery-3 Golden Keys

[drrkgupta]

Excellent post rlv. You have enlightened me! Till now always kept SL in my mind had to be extra vigilant! Also this keeping in mind has many a times put me in deep in negative! Your terming the SL as exit policy is superb!

 

[lekhacnhu]

Thank.you.rvl
Can you help.me. my stoplosss, i have some problem with my stoploss in market stock

I buy abc at price 5.0 and 5.0 is suppor
My stoploss is 4.9
i don't know i will sell when price touch 4.9 and sell 4.8.
Or when price at 4.8. I will oder sell 4.8
- if you have good idea ,please help and share. Thanks ( sory for my english ,i wish.you understand my problem )

 

[bunti_k23]

Thank.you.rvl
Can you help.me. my stoplosss, i have some problem with my stoploss in market stock

I buy abc at price 5.0 and 5.0 is suppor
My stoploss is 4.9
i don't know i will sell when price touch 4.9 and sell 4.8.
Or when price at 4.8. I will oder sell 4.8
- if you have good idea ,please help and share. Thanks ( sory for my english ,i wish.you understand my problem )

Dude the thread was started in 2006 and now it is 2014 almost 8 yrs have passed dont know rvlv is online these days or not but i want to thank him for this excellent thread:thumb:

 

[lekhacnhu]

Dude the thread was started in 2006 and now it is 2014 almost 8 yrs have passed dont know rvlv is online these days or not but i want to thank him for this excellent thread:thumb:

Can you help me with my problem:clap:

 

[bunti_k23]

Can you help me with my problem:clap:

All the things are already explained in this thread but i will try my best to ans ur query plz clarify more i did nt understood what ur saying.exactly what u want to know ? Ur stoploss level or something diff...

 

[aryabhatta]

All good posts but fact of the matter is unless one knows how to trade

Stop loss doesn't make any difference .... it really doesn't ........ you'll lose all your money anyway

without stop loss you will surely lose all your money and with stop loss you will also surely lose all your money. Its just a matter of time & this is a statement of fact.

Only difference is with stop loss you will lose it much slower than without stoploss ... but the end result will be the same

Is it better to go broke slowly over an extended period of time or go broke all at once ?

Well that's debatable .... losing it slowly over time is surely more painful in the long run but it will also give you experience in the markets and you could learn from your mistakes.

Trading is just a simple transfer of accounts from those who know how to trade to those who don't & stoploss or money management will not turn an unprofitable trader into a profitable trader

So whether you use a :-

mental stop
physical stop
emergency stop
break even stop
trailing stop
technical stop
partial stop
wide stop
narrow stop
or a combination of any of the above

If you dont know how to trade it really makes no difference you'll lose all your money anyway. If you do know how to trade then stop loss is useful

 

[eagal]

STOPLOSS -BIG Mystery -and its three golden keys
----------------------

About stoploss







Mystery of Stoploss
One of the great mysteries of trading is the dreadful stop.

�what kind of stops should I use?�

The philosophy outlined here regarding stops is very different than most others. when you learn how to use stoploss wisely, you discover that stops don�t have to hurt.

Stoploss orders are the medicine of trading.

When your trade is sick, stops are there to heal it.
The big question is whether you like to take the medicine before you get sick
as a preventive measure or you wait till you really get sick,and then use the medicine. Natural choice seems to the part two.

There a few ways of using stops:

1. �No Stop� �specialist
What do you call a trader that doesn�t use stops?
An investor.
When a trader lets a trade go against him, he gets married to the stock, starts looking at fundamentals then becomes an investor.

I have seen people, especially six years ago, buy a stock at 100 and still hold it today, even though it�s a penny stock today.



2. �Random stop� or �Gambling stop� �

These happen when a trader knows how much money he wants to risk on a stock, his �bet� on the stock, and that is his stop.
Buy ABC stock with a 500 stop, because that is all they can allocate for this trade. These PEOPLE think trading as gambling, they put their money on the table and forget about it.

The problem with this method is that it is not a method, there is no reasoning behind the placement of the stop.

3. �Adding in stop� �

Some traders keep adding in money into their position as it goes against them. This is also called �Dollar Cost Averaging�.
When people begin trading they think that adding money to a position lowers your cost on it and, therefore, allows you to buy more shares at a lower price. Any Investor, who liked ABC at 60, surely will like it so much more at 50, right?

The reasoning behind this method is very dangerous.

You buy 1000 shares at 60, buy another 1000 at 59, buy another 1000 at 58. Now, your average cost is 59, not 60 as you originally wanted. The stock only has to jump up a single for you to break even, not two.
BIG PROBLEM
Problem comes when the stock keeps FALLING and you are now stuck with 3000 shares on the wrong side of a breakout.

People using this method wipe out their accounts. Traders will become investors. If not on the first 20 trades, then on the 21st that would wipe them out.
It only takes one large loss to devastate an account and devastate the trader.

Stops are like medicine for your trading.

The longer you take before you swallow the bitter pill, the worse your condition is going to be.
Preventive medicine works so much better, it prevents small weaknesses from becoming serious diseases.

Trade this way if you agree it is better

Follow this method of stops =it is very simple,

kNOW YOUR ENTRY REASON,
WRITE IT DOWN,
Always exit a trade
when the reason for your entry no longer exists.

Take Notice We said Exit, not stop.

We do not take stops, we exit.

At times it�s a negative exit, but it is still an exit, not a stop.

A �stop loss� stops your loss, we are not interested in the trade becoming a loss.

Explain�as follows

ENTRY

If you have done your analysis right, you should be able to pinpoint an entry.
=================
An entry is a trigger

that starts a trend,
starts a wave in a trend,
starts a bounce,
starts a fade or a break out.
=====================

BE accurate with your entry, AND your exit should be very simple.

If you entered a trend, you exit when you know that the reason for your entry no longer exists, when the stock refuses to start your trend.

If you entered a breakout, you know the reason for your entry no longer exists when the stock returns back into your consolidation.

So how much is that?
Your stop, or negative exit, (if you did your home work and pinpointed your entry,) is Noise + Spread.

Noise is the normal fluctuation of the stock and spread is the difference between bid and ask.

Basically, if you add them together, it is the amount that the stock can pull back before you know that your entry is wrong.

For example, in day trading, most of our negative exits are less than 1 RUPEE Most of the stocks that we trade have less than A COUPLE OF RUPEES spread and noise. In Swing trading, most of our negative exits are less than 10 TO 20 RUPEES(TEN TIMES plus THAT OF DAYTRADING) for the same reason.

Some people day trade with a RUPEE stop or even two or three rupees. If you do your home work and can pinpoint your entry, how many 1 rupee negative exits can you take before you equal one point or two points?
Imagine having 10-20 attempts for the price of one.
---------------------------------------
Three keys
There are three keys to success here:

1. Pinpoint your entry � You need to know exactly where to enter.
2. Know exactly where the reason for your entry no longer exists �Where on the chart does price have to go to invalidate your entry?
3. Re-entry � If the stock comes back and your setup is still valid, make sure that you re-enter.
Most of us pay less than 100 in commissions, which is a lot less than a devastating stop loss of multiple points.

If you have to pay 500 plus rupees for a trade that didn�t work, it is a business expense, not a stop loss. It protects you financially and psychologically. It allows you to re-enter the trade without any damages.

If you exit with an expense of 1000, it will do a lot less damage than several thousands or your whole account.
How would you feel if you spent a few hundred bucks on a trade vs. lost several thousands on a gamble?

Traders need to get educated how to pinpoint their entries and know exactly when the trade is working or not, in order to keep stops down to business expenses, instead of serious losses.

The secret to longevity and prosperity in trading is
knowing why you are entering,
pinpointing your entries and
preservation of your capital.

Preservation of capital is always more important than capital appreciation.

Hope this helps your trading in some way.

Dedicated to maximizing your profits,

rvlv

Thank you for this wonderful article.

I am a new trader.

I am also using the exit system as said by you but I always keep Stop Loss Order to psychologically cools myself that I will not loose more than that amount but It may be some what deep.

 

[stock72]

thx for you man:thumb::thumb: to dig this gem post :thumb:

Thank you for this wonderful article.

I am a new trader.

I am also using the exit system as said by you but I always keep Stop Loss Order to psychologically cools myself that I will not loose more than that amount but It may be some what deep.

 

[stock72]

so bottom line of your post is if you dont know trading then dont use stoploss ..use STOP for trading:rofl::rofl:

All good posts but fact of the matter is unless one knows how to trade

Stop loss doesn't make any difference .... it really doesn't ........ you'll lose all your money anyway

without stop loss you will surely lose all your money and with stop loss you will also surely lose all your money. Its just a matter of time & this is a statement of fact.

Only difference is with stop loss you will lose it much slower than without stoploss ... but the end result will be the same

Is it better to go broke slowly over an extended period of time or go broke all at once ?

Well that's debatable .... losing it slowly over time is surely more painful in the long run but it will also give you experience in the markets and you could learn from your mistakes.

Trading is just a simple transfer of accounts from those who know how to trade to those who don't & stoploss or money management will not turn an unprofitable trader into a profitable trader

So whether you use a :-

mental stop
physical stop
emergency stop
break even stop
trailing stop
technical stop
partial stop
wide stop
narrow stop
or a combination of any of the above

If you dont know how to trade it really makes no difference you'll lose all your money anyway. If you do know how to trade then stop loss is useful

 

[shk161]

Oops got a bit confused about stoploss vs exit.

Suppose i entered at 5 rs and kept a stop loss of 4.9 then my shares would be sold at 4.9? or i need to explicitly sell and by the time i order sell the rate can come down to 4.5?

Thanks