How to avoid loss in options ?

T

trade_beginner

Member
#1
#1
Hi guys this is my personal experience which I am sharing, I was doing paper trading from 2012 june to 2013 october, in 2013 november I entered real market, from november 2013 to till date, I could not book even single rupee of profit, finally I realized my mistake, so I am sharing here so that, it may help you before taking risk.

1. One should always have stop loss.
( I was not having stop loss, I was just waiting for market to touch my target unfortunately it never happened :), I learned as time goes price decreases, I mean near to expiry ).

2. Its always better to gain less than loss.
(It's ok if you earn Rs.10 but don't loose it. )

3. Should not be greedy.
(Set your mind strong and stable before trading about your target, otherwise you can't book profit )

4. Don't believe in all rumors / news, if you have confidence trade it.

5. Never go in opposite direction of flow, with a mentality that miracle may happen luck will not be favorable always :thumb:

6. Overnight holding will be sometimes paining, try to square off same day, until you are confident about tomorrows opening.

7. while setting stop loss make sure that you will not loose more than 5 % of your capital (I never had stop loss because of this, I never had profit :)).


These all I realized when my demat balance reached Rs. 2500 ( now ) which was Rs. 65,000 in November 2013, hard but true, until you loose money you will not learn.

Never loose money, its paining, Hope Gudi Padwa brings good profit to all members of forum :thumb:.
 
Iron_Man

Iron_Man

Active Member
#2
#2
trade_beginner said:
Hi guys this is my personal experience which I am sharing, I was doing paper trading from 2012 june to 2013 october, in 2013 november I entered real market, from november 2013 to till date, I could not book even single rupee of profit, finally I realized my mistake, so I am sharing here so that, it may help you before taking risk.

1. One should always have stop loss.
( I was not having stop loss, I was just waiting for market to touch my target unfortunately it never happened :), I learned as time goes price decreases, I mean near to expiry ).

2. Its always better to gain less than loss.
(It's ok if you earn Rs.10 but don't loose it. )

3. Should not be greedy.
(Set your mind strong and stable before trading about your target, otherwise you can't book profit )

4. Don't believe in all rumors / news, if you have confidence trade it.

5. Never go in opposite direction of flow, with a mentality that miracle may happen luck will not be favorable always :thumb:

6. Overnight holding will be sometimes paining, try to square off same day, until you are confident about tomorrows opening.

7. while setting stop loss make sure that you will not loose more than 5 % of your capital (I never had stop loss because of this, I never had profit :)).


These all I realized when my demat balance reached Rs. 2500 ( now ) which was Rs. 65,000 in November 2013, hard but true, until you loose money you will not learn.

Never loose money, its paining, Hope Gudi Padwa brings good profit to all members of forum :thumb:.
Click to expand...
Thanks for sharing.. now my question is what were you actually doing between 2012 june to 2013 october ?? Why is it that these things hit you after you started trading with real money. These are very preliminary things that as a trader one must realize before even thinking of trading.

On the number 7 - loosing 5% on capital of 65k is way too much. It means that in 10 continous loss trades, your a/c will be wiped out by 50%. And getting 10 continuous trade for intra players is quite common. The max loss per trade must never cross 2% of the total cap.

These are some harsh realities my friend. I'm just saying for your own good, don't take these otherwise :)
 
shri_r3

shri_r3

Active Member
#3
#3
Great share. Below are few of my additions to 7 points mentioned.
1. Dont overtrade
2. Never average a loosing position. That is insult to injury. Instead use that capital on a much more high probability trade then putting money in already loss making trade.
3.Dont trade close to expiration or be very selective .
4. Always use stoploss.
 
T

trade_beginner

Member
#4
#4
Iron_Man said:
Thanks for sharing.. now my question is what were you actually doing between 2012 june to 2013 october ?? Why is it that these things hit you after you started trading with real money. These are very preliminary things that as a trader one must realize before even thinking of trading.

On the number 7 - loosing 5% on capital of 65k is way too much. It means that in 10 continous loss trades, your a/c will be wiped out by 50%. And getting 10 continuous trade for intra players is quite common. The max loss per trade must never cross 2% of the total cap.

These are some harsh realities my friend. I'm just saying for your own good, don't take these otherwise :)
Click to expand...
What you said is true, Thank you so much for reply.

In fact in paper trading I never had a fear of loosing money, when I traded in real market, mindset was fluctuating, I had a fear of loosing money, also beginning days I was trading with ICICI, around 10k wiped for brokerage only that is also with loss, after that switched over to zerodha its much better.

The big mistake which I made was, I never had stop loss, suppose for example imagine I got 2 lots of nifty call of 8700 for Rs. 77, imagine sharply market comes down, 20-30 points, and current price of same 8700 CE goes to 55, in such cases I was not selling it, instead I was holding with a hope that, market may correct sharply, and sometimes I was averaging it, but unfortunately market direction was not favorable to me. If I would have set stop loss somewhere around 74/75, at least I would have retained my capital. So one should always have stop loss, its always better to gain less than loss
 
T

trade_beginner

Member
#5
#5
If anyone here thinking that its my fake story, kindly have a look on this attachment, please follow some points I mentioned in post 1, never loose money its paining..in fact though I am trading from last 1 and half year almost, I could not book even a single rupee profit above my capital, in between I is to get profit, but again I was going into loss in next trade. So guys don't do mistake like me.
 

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Somatung

Somatung

Banned
#6
#6
@Trade_beginner

Well, it seems that you have learned lessons a bit the harsh way like many of us did face.

As you seem to be a pure directional option trader, did you ever spent any time to study about neutral option - or any kind of option strategy trading?

I do not say you have to do so instead it is may some thing you could get interested in, as losses can be limited in certain ways by trading them. At the same time profit could be limited.

Just some thing you may do not like are may like. So the post is only for thought purpose and nothing else.

Take care / Dan
 
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