Stop Losing In Stock Market?

There is a high probability that a trader might incur more loss than the total profits earned. Therefore, it is important to limit loss so as to maximise profit, which otherwise adjusts against the losses made.
For example, a trader has a portfolio of 10 stocks. Among these stocks seven trades are incurring loss amounting Rs. 1000 and the remaining three trades have gained Rs. 500. But, overall there is a net loss of Rs. 500 in the portfolio. This scenario could change if a trader decides to close his position as soon as any loss occurs. In the above example, if a trader close position on seven stocks before they lose Rs. 400, while other three stocks are kept and return a profit of Rs. 500, then there will be a net gain of Rs. 100. This shows that loss minimisation is a key to boost profit making chances. Strategy of ‘buy and hold’ should not be applied for stocks that are incurring loss, which otherwise would only add up to net loss.

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