In this Article we will discuss and Learn that as the lots of people ask what is the reason behind that when we take the Small position we make the money in the market but as we increase our size (Over Limit) of positions we don’t make such money, what is the psychology behind it.
So today as you all know that the every person has a limit and that limit is defined by loss means how much you can book a loss and with learning I’ll teach you the technique that how to take position at the end of Article and what is the solution for the problem.
The most important thing is that what the position you create your limit should be decided or it should be defined by you all. Suppose if your loss capability is of Rs 1000 and U start booking loss by 2000, 3000 or 10 else whatever be, over crossing your limits i.e. 1000. Then automatically your psychology start mentioning that we have taken a wrong position and your leave that position as by the same time the position is starting in your favour, but you all have left the position before it was coming in your favour.
Suppose you have cut the stock at short or in the long, if it is in long position long that means you have booked loss of 2000, 3000 as everyone of us has the limit of loss booking is variant as 100, someone might be of 1000 or it may be of the 2000, 3000, or 10000.
First we will learn what is your limit as crossing the limit, loss starts and your mind don’t tolerate your loss and soon whatever you have done either BUY or LOSS after your analysis you all think to be out as soon as possible, after your continuous loss you feel unsecured at your trade and U book loss by SELLING it in loss of 1000, 2000 or 3000 and be out by the trade the same time. And then that is the top of trade that is if you have done for long term that limit be bottom as BUY starts and if you cut the stock at low point you have done for short then you cut on top. Because as you know whatever be your Intraday strategy or Long term Investment analysis by the days or an hours as it have over cross the limit of yours you cut of the stock & you finally book the loss.
As per example if you take less quantity your limit is of suppose 1000 for loss.
Example Wipro 10 stocks@100 if you sell then your loss is of 1000/-
Which is your limit that is 1000/-
And if you have bought a Wipro at 500 quantity the 10 total purchase value is of 5000
If a stock fails by 400 and the quantities of 10 then the loss amount is of 1000
This thousand will not pain me as it is my limit but if the quantity be of 100 @ 100 that’s equal to 10,000. Then 10,000 will be the loss as crossing my limit and in this case we will be panic and sell the stock at the same point and we will book loss.
As this is the turning point of a stock to rise from here.