Stop Loss

Stop Loss
Stop Loss

Today, I made a substantial financial loss in the stock market. It was my fault that I did not maintain a stop loss. I was over confident, so I deserved to be taught a lesson, to avoid making the same mistake again. Not being in the mood to work, I decided to write an article and see where it goes. I’ll go with the flow of writing and, hopefully, I’ll find some good out of the bad experience. For those who are trading in shares and / or derivatives, you may already be knowing the term “stop loss”. For the others, let me explain briefly, in one paragraph:

Assume that you bought some equity or took up a derivative position, in the hopes that it will go up and you will make a profit. However, in the stock market, anything can happen and the trade can go against you. When you keep a stop loss order in place, your equity or derivative position will automatically square off if the loss crosses a limit that you have set beforehand. This limit is the maximum loss you are willing to accept if the trade goes against you. A stop loss order will prevent you from incurring “further loss”. Its wise to have a stop loss order in place, so you don’t panic when the loss is high.

But why only stock exchange?

Maintaining a stop loss mindset in every aspect of your life can be very useful and advantageous. It will give you some pain in the present but will prevent  potentially larger pain in the future. The way to do this is, be alert and aware of the various aspects of your life and business. Then keep asking questions to yourself – “Is this working the way it should? If not, how can you make it work? What are your options?”  Let’s consider some examples:

You are a retail trader and sell stuff from your shop. If there’s some product that is not moving, you should sell it at a loss, before it’s value depreciates even further. This seems common sense, but there are many businessmen who hold on to their wares in the hopes that they’ll find some buyer in future. They get emotionally attached to their business instead of being practical. Finally, they end up selling the wares at “scrap value” or even “pay” to get rid of it.

Now let’s assume that you just got into a relationship with someone, and you find that your wavelengths don’t match. You should certainly try to sort out the issues, even if it means slight adjustment. But finally, it should be a two way relationship. Its all about give and take, everywhere. If things don’t work out and you find that only you are being concerned, put a stop loss. End the relationship amicably, before it gets too late. I know several folks who push on with their partner in the hopes that things will work out some day. That day never comes and they live a live of frustration, anxiety, emptiness and futility in their entire life.

Take some time off to reflect on your life and business, regularly. What’s working? What’s not working? Where should you be putting stop losses? Which of your habits are responsible for the deterioration of your health? Which habits are wasting your time? Which ones are draining your energy? Who is making a negative impact on you, your resources, your life or your business? Then make a stop loss!

  • Wasting too much time on social media? Schedule a fixed period of time for your social media using an app or alarm, and stick to that schedule.
  • Boyfriend always turning up late? Dump him!
  • Girlfriend having too many expectations? Dump her!
  • Too much time wasted on your smartphone? Leave groups and uninstall useless games.
  • Business not working out well with all partners? Split!
  • Smoking or drinking too much, recently? Not easy to quit, but find something else to fill the void. Adding some excess physical activity also decreases the cravings.
  • Regular ads in media no longer generating enough leads? Negotiate a discount or dump the ad.
  • Employee no longer being productive, or rather, influencing other employees negatively? Throw him out.

Stop loss!

Before I started writing this article, I was off to the washroom at the office when I was confronted with one Mr X, who is a big “time leech”. He has a habit of chatting about useless stuff, so the moment he tried to start chatting, I cut him off with “Hey X, sorry buddy, something just came up and needs urgent attention. Talk later, OK?” Stop loss! Avoid time leeches and negative talking people altogether. If one of them happens to be your family member who you cannot avoid, spend less time with him.

Stop Loss
Stop Loss Page In My Diary

Action: You know the biggest problem with people? Procrastination. Lack of action. They may get somewhat motivated by reading an article or a book, but the buck ends there. If immediate action is not taken, the motivation fizzles out very soon, just like a soda bottle. Now, if you got even a teeny weeny bit of motivation from this article, grab your daily planner, diary, journal or whatever you use for writing and designate one page, and write “STOP LOSS” on top. Now try to think of as many things as you can, where you need to put stop losses. Give it at least fifteen minutes, if not more. Keep adding new ones regularly. Whenever you succeed in one of them, put a tick, a smiley, and give yourself a treat. Celebrate your success, even if it is a small one. This will keep you motivated to clear the other stop losses. I just did (see the image). I hope you do, too. All the best!

Article update (15th Dec’2018):

If you are from India and wish to trade in the stock exchange, I highly recommend Investar, an integrated investment tool for doing Fundamental Analysis, Technical Analysis and Portfolio Management for the Indian Market (NSE, BSE, NSE F&O, MCX and NCDEX). End-Of-Day data is supported for all above exchanges and in addition, for NSE and NSE F&O, you have a choice of both 5-min and 1-min data.

I use Investar personally and have a special partner arrangement with them. If you happen to purchase their software through my affiliate link, I get some pocket change that goes straight to my “Caffeine Fund”. In return I’ll send you some excellent eBooks on equity trading, as my way of saying thank you for buying Investar through me!

Click here to claim your bonus ebooks, after your purchase. In addition, you can even post any queries in the comments section of this article and I’ll try to guide you in the best of my ability (you need to have an active Investar subscription through me).

Samir Jhaveri

P.S.: Don’t forget to subscribe to my mailing list, I’ll keep you updated when I put out more cool stuff!

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