Suppose my past record says I have 80% win ratio. I gave a call here to short Havells. Now here are two scenes

  1. It is above my point which means I am making a loss. It makes you think if you enter now, your chance of making the profit is high.
  2. It is below my point which means I am making the profit. It makes you think if you enter now, your chance of making the profit is low.

Which one you prefer?

In the answer, every single attendee voted 1 which means they don’t think my trade can make more loss on 1 or make more profit on 2.

This is a complex psychology which let you modify my trades to yours.

Let’s take this famous Bank India trade.

Bankindia

We had it shorted and were tanking proudly. To minimize it, here is what I am doing. I am closing at the first point because of the price action.

And re-entering it on the second point. In this case, we are hence stopping us from potential upside but also keeping the trade open. This is what I do. What do you do for Stop Loss?

Swing High, Fractal ~ All are concept of price action. But once you leave a red trade, your trade psychology will forbid you to re-enter the trade and hence you will end up in loss.

Morals

  • Always enter the same scrip 100th time if it fits the conditions of your strategy and you’re hitting 99 stop losses.
  • Always respect the price action.

Your trade psychology will forbid you to re-enter the trade which you had made loss so cautious.