Stock Market Trading Tricks – The STOP-LOSS.
2008, it was a terrible year for the Indian stock market history. Trading was suspended as the Sensex and Nifty hit the circuit limit of 10 percent. Investor & Trader were losing millions within a minute.
At that time, I was an amateur trader and just jump into trading and started buying & selling stocks. Even I make a decent profit while doing random trading without having much knowledge of fundamentals and technical’s aspect behind stock price fluctuation.
Suddenly market started falling, it was a big crash. I felt like tremor under my feet when I saw my portfolio of stocks were shaking and losing 90 percent of funds value. I was anxious and nervous what to do at that time, just praying for the market to recover so that I square off all my stocks.
It was on every news channel and print media and people were talking about “STOP LOSS”. I started gathering more information on “STOP LOSS” and believe me it is a game changer for me.
STOP LOSS – The Saviour, I used this great technique whenever I trade and make it a habit. Really, it is a worry free trade and I can sleep at night without worries. While using this technique I am able to cut down my losses and started making profits. As I have benefitted while using the technique, let’s learn how to put a STOP LOSS and make your fortune.
STOP LOSS can be put in two ways –
When we BUY Stocks, put SELL STOP LOSS.
When we SHORT Stocks, put BUY STOP LOSS.
Whenever you BUY stocks or any instruments (anticipate stocks to move upward), we put SELL STOP LOSS.
TRIGGER PRICE>=PRICE i.e. Trigger Price must be greater than or equal to price.
Suppose we BUY Equity Instrument, so we put SELL STOP LOSS as shown in the below picture.
Picture – 01
Condition 1 (Loss 10 points, 10 points x 100 Quantity = -1000)
Trade Details
Scrip Name – ISFT
Quantity – 100
Buying Price – 450.00
STOP LOSS – 440.00
Now say the support level for the above stocks is 440.00, so we put SELL SL at 440.00. In this case, let’s say ISFT started going downwards from 450.00 and breaks the Support Level (S1) of 440.00 and reached 400.00. It loses 50.00 points but we will lose only 10 points.
Condition 2 (Profit 10 points, 10 points x 100 Quantity = +1000)
Trade Details
Scrip Name – ISFT
Quantity – 100
Buying Price – 450.00
STOP LOSS 1 – 440.00, Trail STOP LOSS 2 – 460.00
Now say the support level for the above stocks is 440.00, so we put SELL STOP LOSS at 440.00. In this case let’s say ISFT started going upwards from 450.00 and reached 470.00, gaining 20.00 points. At this time we can book profit or trail the STOP LOSS.
Suppose we decide to Trail SL and change the STOP LOSS to 460.00 from 440.00. The stock started falling from 468.00 and not able to break first Resistance (R1) Level of 470.00 and hit the STOP LOSS at 460.00, but in this case, you make 10 points Strategies profit irrespective of the fall.
Condition 3 (Profit 70 points, 70 points x 100 Quantity = +7000)
Trade Details
Scrip Name – ISFT
Quantity – 100
Buying Price – 450.00
STOP LOSS 1 – 440.00, Trail STOP LOSS 2 – 460.00, Trail STOP LOSS 3 – 500.00, Trail STOP LOSS 4 – 520.00
Suppose we decide to Trail SL and change the SL to 460.00 from 440.00. The stock did not fall and continue upward journey breaking first Resistance Level (R1) of 470.00 and break the second Resistance Level (R2) of 500.00. We decided to further trail the SL from 460.00 to 500.00. The Stock breaks the third Resistance Level (R3) of 520.00, reaching 530.00 and we decide to trail SL again from 500.00 to 520.00. Finally, the stock falls a bit from day’s high and hit the SL at 520.00.
In this case, you make whooping 70 points profit because we trail STOP LOSS.
Whenever you SHORT SELL stocks or any instruments (anticipate stocks to move downward), we put BUY STOP LOSS.
PRICE>=TRIGGER PRICE i.e. Price must be greater than or equal to Trigger Price
Suppose we SHORT SELL Equity Instrument, so we put BUY STOP LOSS as shown in the below picture.
Picture – 02
Condition 1 (Loss 10 points, 10 points x 100 Quantity = -1000)
Trade Details
Scrip Name – ISFT
Quantity – 100
Short Selling Price – 450.00
STOP LOSS – 460.00
Now say the resistant level for the above stocks is 460.00, so we put BUY STOP LOSS at 460.00. In this case, let’s say ISFT started going upwards from 450.00 and breaks the Resistance Level (R1) of 460.00 and reached 500.00, but we lose only 10 points due to SL.
Condition 2 (Profit 10 points, 10 points x 100 Quantity = +1000)
Trade Details
Scrip Name – ISFT
Quantity – 100
Short Selling Price – 450.00
STOP LOSS 1 – 460.00, Trail STOP LOSS 2 – 440.00
Now say the Resistance Level (R1) for the stocks is 460.00, so we put BUY SL at 460.00. In this case let’s say ISFT started going downwards from 450.00 and reached 430.00, lose 20.00 points. At this time we can book profit or trail the STOP LOSS.
Suppose we decide to Trail it and change the SL to 440.00 from 460.00. The stock started moving upward from 425.00 and hit the STOP LOSS at 440.00, but in this case, you make 10 points profit irrespective of the fall because we square off our position due to SL.
Condition 3 (Profit 50 points, 50 points x 100 Quantity = +5000)
Trade Details
Scrip Name – ISFT
Quantity – 100
Buying Price – 450.00
STOP LOSS 1 – 440.00, Trail STOP LOSS 2 – 460.00, Trail STOP LOSS 3 – 500.00, Trail STOP LOSS 4 – 520.00
Suppose we decide to Trail SL and change it to from 460.00 to 440.00. The stock continues downward journey and reached 390.00 and break the second Support Level (S2) of 440.00. We decided to further trail the STOP LOSS from 440.00 to 420.00. The Stock breaks the third Support Level (S3) of 420.00 and we decide to trail SL again from 420.00 to 400.00. Finally, the stock falls a bit and started moving upward and hit the SL4 at 400.00.
In this case, we make whooping 50 points profit.
Learn more about Stock Market Tricks, Trading & Investment Advisory
What I have covered in this report is really all that you need to safeguard your hard earned money using STOP LOSS while trading in stock market. This report will hopefully set you on the right path and motivate you with the knowledge.
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