concept of stop-loss was probably developed at the
beginning of the 19th century. So is it less
effective because it is old? Or is it sacrosanct as all analysts
say the same thing - Don't trade without stop-loss?
The market has changed meanwhile.
From Sensex level of 118-149 in 1980 to 4240
in 1992 was a jump of 2845%. Then history was created as
for the first time in 130 years of its life, the market went
through a 4 year long bull-run. It took the Sensex up from 3500 level to almost 22000. A
whopping 600% plus jump.
Even after correction now lasting over 4
years, Sensex is hovering
around 18000 level, much more than 3000 levels of
A simple correction in
Nifty's intraday up-move drives down a Rs
1200 quoted Nifty listed stock by Rs 15-18 or some times even
Traders who use stop-loss without really
knowing where to exit, find the stock
price moving up much higher later in the day.
No longer the old ideas
and strategies work in the new scheme of
In PRISM Intraday Trading system, Stop-loss
concept is simpler and methodical. There are only 2
methods of applying stop loss (normal stop-loss applied by novice
traders are mostly on the basis of the loss they can bear). This allows you to re-enter a stock as it
recovers with the market. In case of Nifty Futures, the
most you lose is 12-15 points, exiting a bad trade
within as low as 4-6 points many a times.
The methodical approach results in total de-coupling of
emotions from trading, giving a mechanical approach.
This enables losing trades to be shut off much earlier
and at a minimum of loss.
Arunangshu M Lahiri is available on mobile nos. 097400-76212
(Bangalore) and 093308-76212 (Kolkata) as well as via