Stop Loss and other issues.

Pratik Mukasdar said…

Sir a very important part of trading is putting stop losses.
How should one keep a stop loss?
Should it be a rupee a stop,near a resistance/support level
or keeping in mind the risk reward ratio ..Sir pls explain

My Notes:

Stop Losses come in two types:

First, a catastrophic stop loss. This represents the maximum loss that you are prepared to suffer in the trade. This is the ‘last resort’ stop. Suppose you risk a maximum of 1% of your trading capital, in any one trade. Then, for every trade, you have a catastrophic stop at a level where you lose 1%. Such stops should be triggered only rarely.

Second, a ‘trade is not working’ stop. This is a stop that is actually useful. AT some point in your trade, you get a sense that the trade is not working. That point should act as a stop. Since the point of ‘not working’ will be different for different traders based on their entry rules, this stop loss is personalized. Each trader will have his or her own level.

If you have entered a trade based on higher highs / higher lows, then the breakdown from a previous low will be your exit signal. If you have entered based on the MACD buy then a reversal of the buy or even a divergence could be your exit signal.

My point is: Exits are different for each trader and different for setups.

ramprasad said…
dear sir,
COULD U PLEASE EXPLAIN ME FIRST 15 MIN RULE WITH AN EXAMPLE PLEASE.

My Notes:

Please do a search of my blog and you will find many posts that give this answer.

rocky said…
How to develop a view on markets each day before we actually start trading

My Notes:

Use the end of day chart to determine the short term trend of the market. You should have one of three choices: up, down or choppy.

In the morning, check out overnight markets, pre market rates (SGX Nifty for example) and news, if any. Correlate the eod trend and the pre market indications. If both are similar then you expect a satisfactory trading day. If they differ, then expect choppy market conditions.

Kuldeep.rk said…
Dear Sir,

People like me, who are big fans of yours & follow your guidelines but working people, do not get a chance to see CNBC during market hours. Most of the times, we do some swing treads in NF, based on own analysis backed by your kind words.
Request you not to stop updating NF & other trades on this forum, which really put value in our trades.

My Notes:

Thanks to Balu for a proper response to Kuldeep. This is what Balu writes:

Balu said…
@Kuldeep.rk

You can find all views by sudarshan on cnbc here

www.moneycontrol.com/technicals

(technical outlook)