Topic: Learning Section

Where to put stop loss in day trading? (Js)

From : Jagmohan Singh at 06:31 PM - Mar 10, 2010 (141 days ago)

Total Views: 381

I recently went to Hoshiarpur in Punjab (my in-laws).

A beautiful sleepy countryside paradise called Bachchauri.

In front of my in-laws house there is the house of a rich, educated and witty farmer who is very fond of discussing stock market with me whenever I go there.

This time we were discussing "stop loss".

We were standing near a neat and clean shed of 12 Buffaloes, all gleaming black like Cadillacs in a showroom!

All of these buffaloes had sharp horns!

Fortunately they were tied to pillars with ropes around 2-3 meters long!

"What would be the stop loss for you while in front of a Buffalo?" my farmer buddy asked me, tongue in cheek!

I looked in his eyes.

"what kind of question is this?" I asked with a smile.

"Come on, tell me!" he insisted.

"First tell me, what can act as a stop loss for a charging buffalo?" I asked.

"when I shout the buffalo's name to her she dare not move an inch thereafter" declared my friend. "Now, tell me, what would be the stop loss for you while in front of a Buffalo?"

"Ok, in that case, I can take this hypothetical case" I retorted.

"Look, my stop loss will be placed at a distance of X meters from the pillar from which the buffalo is tied up"

"What will be that distance?" he again quipped.

"It will be the length of buffalo + the length of the rope in her neck + length of her horns" I replied.

"what if the rope breaks?" he challenged!

I was not expecting this!

"What do you mean 'the rope breaks'" I asked.

"I mean where will you place the stop loss if the rope breaks?" he asked again. "Will you wait to trigger the stop loss expecting the buffalo to behave logically or will you trigger the stop loss?"

Both of us laughed our heart out!

He had conveyed the message he wanted to.

"When you don't know what is happening and the things have crossed your expectation limit, trigger the stop loss, for heavens sake!!!"

In Reply to above Message (1 to 12 out of 12)

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From : Amandeep Bawa at 06:39 PM - Mar 10, 2010 (141 days ago)

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10/10 to ur thread Bhaaji..

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From : Nilkanth Koranne at 06:42 PM - Mar 10, 2010 (141 days ago)

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Excellent.

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From : Ankur Dhoot at 06:42 PM - Mar 10, 2010 (141 days ago)

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One more practically sound object oriented example for trading....wah sir ji

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From : Promoth J at 06:59 PM - Mar 10, 2010 (141 days ago)

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I will Give you 100 Marks for this. Keep Going

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From : Ankur Dhoot at 07:02 PM - Mar 10, 2010 (141 days ago)

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Bhaiji You are giving marks to teacher :)

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From : Julius Jr at 07:42 PM - Mar 10, 2010 (141 days ago)

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You are always 10/10.

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From : Ashish Dewett at 09:57 PM - Mar 10, 2010 (141 days ago)

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nice one...

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From : Vivek Pherwani at 12:00 AM - Mar 11, 2010 (141 days ago)

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nice one.

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From : Naagesh B at 12:53 AM - Mar 11, 2010 (141 days ago)

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Jagmohan Ji I request you to write a book "Theory and Practice of Stock Markets" You are applying many practical things to markets and explaining in a very simple, meaningful and understandable way mixed with a good sense of humor. Extraordinary. Thanks for your posts. Keep posting.

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From : N.senthil Kumar at 06:12 AM - Mar 11, 2010 (141 days ago)

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u r making us to b addicted to ur threads....... gr8888888888888 sirji...

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From : Kailash Chaturvedi at 06:37 AM - Mar 11, 2010 (141 days ago)

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Superb dear ...taking ur views to my thread ...with regards

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From : Bhupinder Singh at 06:56 AM - Mar 11, 2010 (141 days ago)

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one of the best advice especially for a beginner like me thanks ji

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Where to put stop loss in day trading? (Js)