{"id":8,"date":"2012-06-19T04:20:05","date_gmt":"2012-06-18T22:50:05","guid":{"rendered":"https:\/\/blog.fundsindia.com.cp-29.webhostbox.net\/?p=8"},"modified":"2013-04-09T13:10:12","modified_gmt":"2013-04-09T07:40:12","slug":"tight-stop-loss-stop-loss-on-closing-basis-give-me-a-break","status":"publish","type":"post","link":"https:\/\/www.fundsindia.com\/blog\/uncategorized\/tight-stop-loss-stop-loss-on-closing-basis-give-me-a-break\/8","title":{"rendered":"“Tight Stop-Loss” & Stop-Loss on Closing Basis: Give Me a Break!"},"content":{"rendered":"

It is quite common to see trading calls where the recommendation is to buy\/sell with a tight stop-loss. <\/strong><\/span><\/p>\n

I just don’t understand what is one supposed to do with such a recommendation and feel sorry for the ones who receive and act on these calls.<\/p>\n

Tight stop-loss is such a loose term that it could vary from one person to another. Stop-loss should be determined on a logical basis and there should be a technical rationale for arriving at stop-loss level. If you cannot determine a logical stop-loss you are better off avoiding the trade.<\/p>\n

Consider this: If you don’t know where your stop-loss is, how does one calculate the risk-reward in the trade and more importantly, how do you decide if at all you should take the trade or not. <\/strong><\/span><\/p>\n

Along with the “Tight-Stop loss” issue, the other issue is relating to calls with a stop-loss on closing basis. I fail to comprehend why someone should have a stop loss on a closing basis. This type of a trading call may be useful to amateur traders who are in the market for excitement and fun, not serious about making money.<\/p>\n

The ones who are serious about trading and deal in position size of some consequence would realise that it makes little sense to have a stop-loss on a closing basis. Amidst heightened volaitlity you can imagine the kind of stress a trader has to encounter if the stop loss is on a closing basis.<\/p>\n

Imagine this scenario..What if the price trades below the stop-loss level for the best part of the day and you are holding on with a stop on closing basis and price cracks sharply at 3.15 PM or just ahead of market closing. It basically defeats the purpose of having a stop-loss.<\/p>\n

If you trade huge position in the cash segment or dealing with derivatives, it does not make sense to have a stop-loss on a closing basis, PERIOD.<\/p>\n

The stop on closing basis is mostly adopted by traders who fret about the sceanrio where the stop-loss is hit and price resumes its move in the aniticipated direction. In such a case,\u00a0 you can always find another entry, with an acceptable stop and risk-reward to re-enter.<\/p>\n

If not, there are hundreds of other instruments and the next profitable trade is always round the corner.<\/p>\n

Trade safe and don’t get hurt.<\/p>\n

Cheers<\/p>\n

B.Krishnakumar<\/p>\n

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It is quite common to see trading calls where the recommendation is to buy\/sell with a tight stop-loss. I just don’t understand what is one supposed to do with such a recommendation and feel sorry for the ones who receive and act on these calls. Tight stop-loss is such a loose term that it could […]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[59,1],"tags":[],"yoast_head":"\n"Tight Stop-Loss" & Stop-Loss on Closing Basis: Give Me a Break!<\/title>\n<meta name=\"description\" content=\"It is common to see trading calls where the recommendation is to buy\/sell with a tight stop-loss. 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