Imagine!
You want to go to from Mumbai to Delhi and you take a bus. Suddenly you find that the bus is going in opposite direction to Chennai. My god! What are you going to do?
a) Get down from the bus, Feel Stupid and take corrective action.
b) Sit in the bus, till the bus takes you to the last stop, Wait for another bus to come to take you to Mumbai and cancel the further tour.
c) Come to Mumbai and then go to Chennai.
99.99% people would do step A. Why because that’s most simple and right thing to do.
Now take another example
You buy a stock say Reliance at Rs 1500 expecting it to go to Rs 3000. It turns around and starts going down say at Rs 1350 you realize its going to go further down. what are you going to do now
a)Cut the position
b) Let it go down and wait for your levels to come
c) Wait till the stock price is Rs 3000.
95% people i know would select Option B, 4% Option C, 1% Option A.
Why two different things when it comes to stocks or commodities, why this attitude towards stocks where you loose real money?
Probably the reason is people find it difficult to admit that they have commited a mistake, its fight between their ego to admit that a mistake has been done. Who wants to admit to their mistakes, No one. The term called Stop Loss can save them, which is admitting the mistake and saying OK let me do the right action.
If the mistake is not corrected you loose time and money both. You Bleed Dark Red.
Tip :Use Stop Loss if you are trading, Fix a target for upside as well as downside. Tell yourself that you are going to get out as soon as the price goes down. Trust me you are going to be happy.
nice solution for happiness