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There is a famous saying:
“He that fights and runs away, may live to fight another day; but he that is in battle slain, will never rise to fight again. ” by Tacitus
For Traders, Preservation of Capital is of utmost importance. If we miss a trade, or exit a trade early, or get stopped out, then nothing is lost. We will take the next trade, and many subsequent trades, with prospects of profits.
But, if we lose our capital then there is nothing we can do. We will have to stop trading altogether. We are out of the business.
Preservation of Capital is essential for traders.
Traders go with Market Flow
I received a comment which I did not add to the comments section, instead I am giving it here with my notes.
The comment was:
“You dont know even S of Share market Sudarshan. ….. one day u say to go long and another day short on nifty.. u just dont know anything.”
My Notes:
There is a conceptual principle that I should explain. As traders, we follow the market. We do not control these markets. The purpose of trading is to try and identify the market trend and go with it. Quite often, the Market Trend will change. What should the trader do? The trader’s task is to go with the trend. If the trend changes, the trader MUST change his stance. If he remains obstinate and sticks to his original position, the Market will sweep him away.
Once the Nifty went below 4920, our long positions were to be closed. That is prudent money management. On Thursday, the Nifty opened gap down at 4900. We close our positions at 4900, without any waiting. No new positions were taken because the trend was confusing. In Markets Today with Udayan, a program broadcast at 5.30 and 8.30 PM, on Thursday, I gave two levels, 4880 below which a sell is possible and 4925 above which a buy. Today, Friday, the 4880 level was breached and we went short. This position was disclosed at the 12 PM show.
Our short positions were closed since we did not wish to carry overnight positions.As I write this, U.S. Markets are tumbling. Quite possibly, the Nifty may open lower on Monday. But, do I regret closing my short positions? Absolutely not. Because, we have two principles: we try to avoid carrying positions taken on the first day of the new settlement, since the trend is often unclear, and, second, we avoid overnight positions when Nifty is inside a trading range.