The idea is after adjusting your loss with profits, net basis one should be in surplus profits. However the common perception of most people about profitable traders is, they don't incur any loss. This misconception is further fueled by people of selfish motive by sharing only profits and never disclose the losses incurred on public platforms or social media.
In our profession, we interact with so many novice / new traders who wish to hesitantly join us, understand our strategy, steal some free stock ideas from us. Their main concern always is STOPLOSS. They always want to know, if BullishMomentum stocks hit stop loss? What if they bought our stock and it hit the stop loss.
To their utter disappointment, we always tell them yes BullishMomentum stocks hit stop loss on regular basis. We also tell them if one wants to earn serious money from the market, he needs to embrace stop loss. Stop loss is your true friend, your sincere wealth advisor and your well wisher in the financial jungle.
Let us try and understand this fear
Most of the time members retort back to us saying there is result tomorrow of XYZ stock that you recommended, what if there is bad news? Further if the result is bad, they again approach us asking if they should exit the stock since result was poor. If that's not enough there are plethora of news circulation, and one bad news again the panic stricken member comes to us asking for advice on the stock.
Fear is a natural instinct / reaction to perceived threat. In this case there is threat to their capital or profit potential. Fear makes some trader over react and they feel compelled to liquidate their holdings and sit in cash, refraining them taking any more risk.
The same fear makes some traders to go in a shell, making them incapable of liquidate their holdings. No matter what, but they will never exit a trade in loss even if that means years of being stuck in that position. The stuck capital also means loss of opportunity and fair interest earnings.
By now you must have identified yourself with one set of the trader. You either over react or you go numb. In both cases, you feel difficult to proceed with next trade. The next trade is always approached in all kind of negative sentiments instead of calm and composed manner. Eventually you stop feeling positive about stock market, loose self confidence, feel the guilt of a gambler.
Enough discussing this hopeless feeling we all have gone through in our journey to a successful trader. Lets now figure out the solution. How to come out of this fear psychosis? Yes you guessed it right, it's our friend, the most hated STOPLOSS. Start loving it, as we tell you why.
Every trade has two actions 1.Entry 2. Exit and both are executed by trader. The outcome of a trade which is realized only after exit can be any of the two - 1.Profit 2. Loss. While the trader has control over his actions, he has no control on a trade's outcome, which is defined by Market (underlying forces). The sooner a trader understands and accepts this, the better for his wealth and trading career.
“The hard, cold reality of trading is that every trade has an uncertain outcome.” – Mark Douglas
Stop Loss is nothing but setting a rule for each of your trade. You predefined the loss in a trade by using stop loss. The stop loss not only limits your loss in each trade, but sets your capital free for next opportunity - a new trade in trader's context. Execute your losing trades immediately using our beloved stop loss, don't fear them. By predfining and cutting your losses short, you are making your capital available to profitable trades. You are utilizing your money in the best possible way to profit.
Every trader's intention, when entering a trade is to earn and increase the profit. Stop loss lets you achieve that. It helps you manage and minimize risk. Why did you fear it? Do you still fear it? Let us know in comments.
No comments:
Post a Comment