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Updated: Nov 19, 2019


‘The art of cutting your losses’


Photo by Lorenzo from Pexels

I bet, If you manage to learn this simple technique, you are going to save much more money than you have ever expected.

Suppose today, you bought a stock at 100 Rs and next day it went down to 90 Rs.

What would you do?

Think about it for 10 seconds and remember your opinion.

Most probably it would be ‘I will hold’. Not just you but 90% of the investors will do that same.

Now, let’s discuss something you don’t know about.

The stock plunged 10% ( from 100 to 90) but for coming to the same price it has to gain 11% (from 90 to 100). And it goes like this:

It means that if 100 Rs. stocks go down by 50% it comes to 50 Rs. but for reaching at the same level (100 Rs.) it has to rise 100%. So better know and find out whether to hold or sell out the stock with a minor loss in order to prevent big future loss.

So ‘It is harder to regain the lost value’

Two Best ways to learn ‘The art of cutting your losses’

1. Awareness/News:

Example: Date: [March 05 2018]

Date: [March 06 2018]

Regulatory based stocks like Pharma ( US FDA regulated) take no time to destroy your wealth within seconds. I am not saying pharma stocks are bad investments but you need to be extra cautious in case you wish to hold it for longer-term.

Just be Aware.

2. Stock Technical Analysis:


Analysis of financial markets is either fundamental or technical. Fundamental analysis focuses on financial statements in assessing the condition of a company and in predicting its future performance. Technical analysis focuses on a stock's historical price pattern, as portrayed on charts, to predict future price movements.

Technical analysis plays a very important role in determining the best ‘entry price’ and ‘exit price’ for the stock and used by millions of traders/investors every day.

Some of the indicators like RSI tells you about oversold and overbought zones so that investors can buy the stocks when it is oversold and vice versa.

Example: According to RSI , Kajaria Ceramics is the best stock to buy for long term. Company has strong fundamentals and RSI says its now under oversold zone. So should be bought and hold for long term for maximum gains.

Stock Technical analysis is the study of charts and numbers where one can actually predict the future upside or downside of the stock based on data and tactics.

The company has lots of things to observe, See the financials, concentrate on ratios and margins, compare with peers, study about promoters, keep an eye on liquidity, make sure you know the debt, know future plans, forecast the scope, speak up with indicators and press BUY button.

That is how you can save yourself from massive destruction.

Note: One indicator never tells the real story, if it was that easy then everybody would be making millions without any obstacles, try to combine many chart indications to determine the actually trend and then move forward to invest your money.

Thanks! Akshay Seth Research Analyst (SEBI Regd.) akshay.equity@gmail.com Linkedin: connect here

Learn 'Stock Analysis' in 30 days: here Get daily BUY/SELL calls to subscribe here Get Professional Investment Advice at Equityboxx here Start trading in 3 hours with Brokerage Free Demat account: Open here





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