Stop Loss Limit - Recurring Deposit of Accumulated Losses

General
1

The Myth behind Stop loss limit.

Assume you are trading with a capital of about 250000

You have taken four positions every day and making profits every. But one of the trade always ends up in losses.

Let the loss Trade be as one lot of Nifty Futures. Your stop loss limit is 0.2% Assuming Nifty at 9000.
It is equivalent to 18 points. So the loss would be about 1500.

If we assume trading for 200 days in a year total loss is 1500 * 200 = 300000

Means you are making recurring deposit every day to your future losses.

Facts.

  1. Nifty will never go to zero.
  2. Inflation makes everything going up.

Now the total loss per year is divided into points per lot is 4000 points.

Do you think market will fall 4000 points in a day ?.

Assume maximum fall on closing basis as 600 points happens twice a year your total loss would be 1200 *75 = 90000.

If you are ready for losing this one of the kind of loss and have sufficient capital then you can forget about setting stop loss limit for ever.

Disclaimer .

I don’t set stop loss limit. Even Yesterday Heromotors fell 130 points intraday I had one lot bought at 3341 and added two more lots.

2

There is a point which i dont understand:
If the winning percentage is 75% (1 trade out of 4 fails) , without stop loss, how do you know where to exit on that 1 trade?? Or are you converting that position from MIS to normal?? If u let it go against you , it might close more than what you wanted to lose on that trade.

3

My example is not for MIS. I do positional trading. In that perspective I told that.

Yesterday I had BEL with EOD 7425 Negative.
If I had stop loss I would have lost.
Today I sqoff it with +225 .

Yesterday my Hero Motors was at 18000 Negative today it recovered losses reduced. During intraday it went to -44k. Today it Came to zero loss.

Need to follow few stocks regularly trade only those stocks you can understand better how they move.
Select the stocks which are in uptrend. You can keep for few days.

For shorting we can’t keep for long so stop loss limit should be set. My shorts positions end within 15 min.

MIS order with stop loss limit rise bp and we lose concentration.

Best thing is to use our own money no leverage. This is safe. I am following the same. I understand every one has their own style of trading but Day by day our experience should reduce losses and time we spend in front of terminal.