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The Stop Loss feature is a trader’s best friend. View the presentation to know all about it.
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Demystifying StocksImportance of Stop Loss
How to Quickly Lose Money on the Stock Market?
Ignore the Stop Loss Feature
• David got that brilliant tip from a stock market tipper & the confidence the tipper
exuded in the performance of the scrip had already got him excited.
• He was now eager to try his luck with the scrip the moment the market opened
and hoped to make a killing by the end of the day.
• Fate, however, had something else in store for him.
Here’s How David Lost Money
• To make the profits look even better, David
decided to use the leverage trading facility.
• He had Rs. 10,000 in his trading account and
because he opted to do leverage trading, his broker
allowed him to buy stocks worth Rs. 40,000.
• He ended up buying 20 shares worth Rs. 200 each
of particular scrip.
• Now as luck would have it, the share price
plummeted by Rs. 10 and David in the bargain lost
Rs. 2000 in just a single trade.
Here’s How David Lost Money
• And such was his confident in the tip and the tipper that he didn’t bother to apply a
stop loss because he never ever considered the fact that the stock might actually tank.
• Fortunately in David’s case, he thought of investing only Rs. 10,000 which by no
means is a small amount but imagine the situation had he opted to invest a bigger
amount.
• His losses would have been much higher that what it is presently.
Stop Loss Feature – A Trader’s Best Friend
• The Indian share market just like any other market around the world can be quite
unpredictable and when it comes to timing the market, even the most seasoned
players have ended up losing fortunes.
• While market or stock movements can continue to remain highly unpredictable and
sometimes volatile, traders who chose to play safe and deploy smarter strategies are
the ones who make real money and when it’s time to face a loss-making scenario,
again they are the ones who exit with negligible losses.
An Example to Remember
• Vishal Shah, who’s has been trading on the BSE since he
was 20, never goes into a trade without applying the stop
loss feature even if everything on the bourses show green.
• He says despite their being fairly easy and convenient
options available in the online trading software to set stop
losses, most people feel too lazy to set it thinking that the
market is unlikely to reverse the positive trend.
• The fact of the matter, however, is that you can never be
sure.
• So for Vishal, no matter how big or small the trade is, he
ensures that he has applied a stop loss.
What Should Be the Ideal Stop Loss Margin?
• The next question on everyone’s mind would
naturally be how much should be the margin of stop
loss.
• This, however, can differ from person to person and
generally depends on an individual’s risk appetite.
• Experts recommend the ideal stop loss margin at 7-
10% for short and medium term traders.
• For day traders, they need to put up a much more
aggressive stop loss possibly in the range of 0.5 to
1%.
• So the next time you try and execute a trade in the
markets, be sure to apply the stop loss.
•You never know which way the markets would turn.
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Thank You
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