Stop loss (SL) compulsory
Why SL compulsory?
Reason 1: Small loss as sl (1 to 3% of capital), it is wrong going to protect the capital.
How it protect: Scenario 1. If I buy 100 shares of x company of Qty 1 and sl of 98... risk is 2 pts; if my sl hit and I am going to lose of 2 pts and remaining capital I can reuse and implement in another high probability trade. Scenario: SL not hit and target reached within 2 days. After booking profit and we can re-use the released funds for another high probability trade. Scenario 3: Not kept SL: if price keep on falling, you will not only lose your capital invested on particular stock, you even lose time. Further, if averages of 50% probability, your price may reach break-even with 3 to 5 months of time or it may even go lower, that means you are losing time and money (capital) with increasing the investments on losing trades.
Reason 2: Time and money blockage can be saved, if SL hit. (Can Used to implement the remaining capital on high probable trades).
Reason 3: If SL not kept:- portfolio draw down of 10% to 15% (which is 10,000 to 15,000 on one lakh capital) can be seen. which might be equally to 40 SL. On the other hand, capital of 1L blocked. This enhances the keeping losing trades for long time in portfolio kills and decrease the return of investments.
Reason 4: If SL kept: it helps to analyze; why stock hit the stop loss and how to improvise the system and help to know stock specific SL and behavior patterns.
This enhances the effective capital utilization for further good trades.
Reason 5: Over the years, we will be able to develop the Sl techniques to be used as trailing the profits (TSL) to run winners long, thus making it as natural selection process allowing only winners to be in the protofolio for long duration.
Why SL compulsory?
Reason 1: Small loss as sl (1 to 3% of capital), it is wrong going to protect the capital.
How it protect: Scenario 1. If I buy 100 shares of x company of Qty 1 and sl of 98... risk is 2 pts; if my sl hit and I am going to lose of 2 pts and remaining capital I can reuse and implement in another high probability trade. Scenario: SL not hit and target reached within 2 days. After booking profit and we can re-use the released funds for another high probability trade. Scenario 3: Not kept SL: if price keep on falling, you will not only lose your capital invested on particular stock, you even lose time. Further, if averages of 50% probability, your price may reach break-even with 3 to 5 months of time or it may even go lower, that means you are losing time and money (capital) with increasing the investments on losing trades.
Reason 2: Time and money blockage can be saved, if SL hit. (Can Used to implement the remaining capital on high probable trades).
Reason 3: If SL not kept:- portfolio draw down of 10% to 15% (which is 10,000 to 15,000 on one lakh capital) can be seen. which might be equally to 40 SL. On the other hand, capital of 1L blocked. This enhances the keeping losing trades for long time in portfolio kills and decrease the return of investments.
Reason 4: If SL kept: it helps to analyze; why stock hit the stop loss and how to improvise the system and help to know stock specific SL and behavior patterns.
This enhances the effective capital utilization for further good trades.
Reason 5: Over the years, we will be able to develop the Sl techniques to be used as trailing the profits (TSL) to run winners long, thus making it as natural selection process allowing only winners to be in the protofolio for long duration.