@tnsn2345
You are making assumption that everyone simply waits for stoploss to be hit. As in my previous post I have clarified and as Anurag has also mentioned that choice of exiting the trade before stoploss is hit is always open and often exercised. Also stoploss is used to prevent runaway losses especially during sharp move in opposite direction of trade.
You are making assumption that everyone simply waits for stoploss to be hit. As in my previous post I have clarified and as Anurag has also mentioned that choice of exiting the trade before stoploss is hit is always open and often exercised. Also stoploss is used to prevent runaway losses especially during sharp move in opposite direction of trade.
The definition of SL is clearly your unrealised expected loss in case the trade is wrong. This forms the basis of quantity or exposure you may want to take on a trade. The definition of wrong trade is not necessarily move in the wrong direction but the outcome is not as per EXPECTION.
The second point of large runaway losses in the opposite direction can be termed as something happening exactly opposite to your thinking and the outcome is UNEXPECTED.
If one is using a same SL for both of the above objectives than he may end up taking many low or equal probable trades than higher probable trades. Effectively the success rate of trades may be compromised. See only MM and discipline alone cannot create substantial wealth for a trader. Higher success rate of trades is also a prerequiste to become a successful trader.
Now coming to your analogy of bicycle. Everyone has his own prespective and sees the world accordingly. In my view the smaller wheels are like extra caution, e.g. like someone uses 1 indicator to trade with 40% chance also when he has 2 indicators giving same signal his chances get to say 55%. So he trades only when both indicators give same signal. So he obviously misses some oppurtunity as well. So in my view inherent precautions in ones system are the two smaller wheels.
Now what is stoploss then?
Stoploss is the brakes. It is used to prevent falling in pothole. Now whether you drive 2 or 4 wheeler brakes are paramount. Also its importance increases with increase in stakes. Like one can drive bicycle withot brakes but what about driving a car without brakes!
Now what is stoploss then?
Stoploss is the brakes. It is used to prevent falling in pothole. Now whether you drive 2 or 4 wheeler brakes are paramount. Also its importance increases with increase in stakes. Like one can drive bicycle withot brakes but what about driving a car without brakes!
Regards,