prathamaggarwal
Education

DR REDDY- A HIT BUT A MISSED TRADE

NSE:DRREDDY   DR REDDYS LABS
I asked one question of each member of my watsapp groups and each member who takes my training one simple question.

“I was short on Drreddy and had a Put position in this but at the end of the day when realized that share might be slightly positive and also has approached my Stop Loss, so I was looking to exit my put the same day, However was unable to do as my bid was not executed. In the morning at 10.09 I exited my put at Rs . 6.5. You will be amazed to know, that after I exited it highest bid went to Rs .200 (although highest traded bid was Rs . 90) in the next 5 minutes and share was 30% down at this point. Obviously I was devastated to see that I missed a profit of 50,000 per lot.
So what you guys think about the situation, and if you would have been in such situation, what would have been your thoughts? Its going to be important lesson, Would request everyone to share their views.”

See it is a very subjective question and open to alot of answers. So a lot of people shared their views and I really appreciate and respect views of everyone. Everybody has their view and here is my view.

Anybody remember the first guy who won Rs . 5 Crore on KBC , he won the lottery and got 5 Crore. (Many would say it will require alot of knowledge, that is true but it is also a one time event)
Everyone remember his KBC Glory and what is the after story?

He got overwhelmed, and he decided to do nothing after winning. He a very short span of time, he again lost all the money won. In an interview he shared “What I am left with now is very little money, no career prospect and a whole lot of disappointment”.

I had a stoploss, which got hit. So as per the rules, I should exit my trade at the earliest. In the morning at 10.09 AM, I found a decent bid and decided to clear my trade, But what if I did not do it?

If I did not execute the order, then I would have definitely earned a lot of money. A money good enough to fund me for 2 months, but life is not just 2 months, right?
The probability of such events is less than 1% and having the trade on such days has even lesser probability. So in the game of probabilities, betting on such probabilities is planning to loose.

Staying in the trade would have cultivated a wrong habit of Staying into trade even after Stop Loss was hit with an unrealistic hope of making extra ordinary money from the trades, and this situation has a 99% losing probability. It would have lead to increased risk of capital, also It would have lead to breach of rules which means loss of discipline.

As one of the best book Trading in the zone writes "For the traders who have learned to think in probabilities, there is no dilemma. Predefining the risk doesn't pose a problem for these traders because they don't trade from a right or
wrong perspective."


Pls , remember, A trader can survive a loss, but a trader cannot afford loss of discipline.

I made a call to exit a trade, if I am sensing a movement opposite to my position and that’s how I continued to maintain discipline. Discipline is one skill that can help you survive the most adverse situations and I thus followed that.

One lottery trade would have gave me some money and would take taken away a lot of future money that I am going to earn. I do not even know whether such trade will ever come to again or not, but I know that following rules will help me every second in this market. By following my rules and maintaining discipline, I trained myself to make the losses better. (Following stoploss)

Trading in the zone writes “If and when the market tells them that their edges aren't working or that it's time to take profits, their minds do nothing to block this information.”


Discipline, Money Management and Success walks hand in hand.

I would have loved to written 2-3 more pages or even more, but did not wanted to make it boring :P
I would really appreciate views of probably all the viewers and a healthy discussion on money management. Thanks :)
Feb 16
I agree with you Pratham that trading is a probability game. One trade outcome is totally unique from another trade outcome. What happened in Dr reddy's was a highly unlikely event to occur in a blue chip share and we shouldnt get influenced by such dramatic movements. And the way you have explained the importance of money management and discipline is legitimate and easy to understand. Keep posting your analysis it really helps in learning and understanding different perceptions.
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@sunakshig2, That's really well written. Thanks and keep sharing.
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