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Derivative Strategy for
August 7, 2012
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Scrip
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CMP
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Recommendation
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Target
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Stop Loss
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NIFTY
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5,297
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BUY
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5,360
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5,270
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GAIL
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361
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BUY
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368
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358
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KOTAK BANK
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562
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BUY
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575
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557
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BPCL
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347
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SELL
|
336
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351
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WIPRO
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344
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SELL
|
338
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347
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My Exit Beliefs In part one of this article, we considered a few questions: Should we use a tight stop loss to cut any losses quickly, or a wide stop loss to allow some room to move? How quickly should we move the stop loss to breakeven ? Should we take profits at a target, or should we let the profits run, perhaps trailing a stop behind the price? In attempting to answer these questions we looked at a number of charts, we chose entry criteria, and then looked at possible options for the exit. And this is what we discovered: Firstly, in each case, the profit or loss taken out of the trade was more a result of our chosen stop and exit method, not our entry. For the same entry, there were numerous possible exits, some profitable, some breakeven and some at a loss. And secondly, we cannot know, except with hindsight, what will be the most profitable exit strategy for that particular trade. In other words - the exit is more important than the entry. The exit has more bearing on w...
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