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'Every trading literature asks you to trade with stop-loss.
Every analyst tells you to always use stop-loss. Stop-loss
is nothing but an admission that your trading is
speculative.
If you are uncertain, don't trade. Please don't speculate.' |
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The
concept of stop-loss was developed at the
turn of the 20th century. No, not 20th going
into 21st. It was the 19th century
turning into 20th century.
Is it now less effective because it is old?
Or is it sacrosanct as analysts say it is. 'Don't trade without stop-loss'
- is what ALL analysts say. Except me.
There are literally hundreds of technical theories
and strategies developed over the years. One
dates back to 1892 and it still works. So
old does not mean redundant.
However, latest theories are based on highly
complex calculations. If not akin to rocket science,
you can say, definitely aligned with advanced optics and
manufacturing engineering.
One of the modern age Guru of technical
analysis - Tushar Chande - has a PhD in Engineering
with an MBA from Pittsburg University. He holds
patents in creative solutions to
manufacturing process using high powered
laser and optical fibre. His VIDYA is widely
regarded as ground breaking new-age
technical analysis system.
Contrast this scenario with our analysts who
still swear by the same old indicators and stuffs
which were developed for positional trading
in a market that had no intraday trading.
Add to this mediaeval setting the fact that
Indian stock market has changed almost
beyond recognition in the last 27 years.
Sensex jumped from 118-149
levels in 1980 to 4240 in 1992, a 2845%
increase. Then history was created as for the first time in 130 years of its
existence, the stock market
went through a 4 year long bull-run (which
hopefully will continue till - hold your
breadth - Sensex 40,000 - my prediction!). It took the
Sense up from 3500 level to over 21500. A
whopping 600% plus jump.
At this level, a simple correction in
Nifty's intraday up-move drives down a Rs
500 worth Nifty listed stock by Rs 8-10 or sometimes even
more.
Naturally, the novice trader brought up on
the free advices provided by the analysts
and experts
extolling the absolute need for stop-loss ; would
routinely exit at an affordable stop-loss
level of Rs 5-7.
The same stock
would zoom up later as Nifty correction
ended, leaving the hapless stop-loss-ed
traders blaming their bad
luck.
Actually, it was not bad luck. It was the
inability to comprehend the change that has
come into the trading
system.
No longer will the old ideas
and strategies work in the new scheme of
things.
At my training you will learn that with
PRISM system,
you DON'T NEED
to have stop-loss at all!
Look at the examples here. |
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