Tuesday, December 28, 2010

why we don't trigger stop loss

there are two reasons

why you will pull the trigger of the rifle

in the jungle

in front of a lion!

one

to protect yourself.

second

to hunt the lion.

the lion is likely to get killed

in both the cases

but

there is hell of a difference

between the two motives!

in one

you are defensive

in other

you are on the offensive

one is full of fear

other is full of confidence

similarly,

every trader has two reasons to trigger the stop loss

one

to prevent loss

second

to gain profit

again, there is hell of a difference between the two!

if first one is the motive

you will not trigger the stop loss

because your amateur mind will not be ready to bear even the small loss till that time!

and as far as the second reason

to pull the stop loss trigger is concerned

an amateur trader won't understand it!

he fails to see how triggering the stop loss

can gain him profit!

this is the fundamental reason

why amateurs don't honour the stop loss!

in the words of Harv Eker

the rich play 'to win'

the poor play 'not to lose'!

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