At least once a week, I get asked if I can teach some kind of a “zero loss strategy”.
It’s a very innocent question and I completely empathize with those who ask it.However, my situation is that of a gym instructor who is constantly being asked if I can offer a pain-free strategy to build muscles. You can imagine my frustration.
If the idea of building a strong physique without incurring any pain sounds ludicrous then so should be the idea of being a profitable trader without incurring any losses.
Yes, there is one zero-loss strategy in the stock market and that is to “sit on cash”.I promise you will never lose a dime if you sit on cash and don’t take a trade.I am guessing you do want to trade and so sitting on cash is not an option.
Before you curse me and go back to Google for finding another article where the “real secrets” of no loss strategy are revealed, just hear me out.You will thank me later.
I am not trying to make fun of those who are risk-averse. I am the biggest proponent of risk management you would find. What I want isto have a serious discussion about this “zero loss” mindset that beginners have.
Losses are inevitable in trading because traders deal with probabilities.There are hundreds and even thousands of variables that move the market and it is impossible for any trader to know them all. A trader is just operating within the bounds of his knowledge and skills.
Even the most astute traders I have met and worked with have a success rate of about 60-65% (and I am talking about traders who earn in 7 digits monthly).
It means even the best traders out there lose money 35-40% of the time.
The answer to that is obviously “no”.The real questions beginners should be asking are:
- Do I have a strategy that has a consistent success rate?
- How much do I make when I am right?
- How much do I lose when I am wrong?
Trust me, if you’re asking these 3 questions, you are on the right track.
Let’s take a moment to acknowledge that nobody likes to take a loss. I have been trading for over 16 years and even now a 1 rupee loss pinches me.Of course, my rational brain shrugs it off but my emotional brain cringes with every red trade.
We all have these 2 brains within us. Unfortunately, the default setting is such that the emotional brain has disproportionate power over the rational brain and the boss never wants to see a loss.
Successful traders, on the other hand,train their rational brains to be the dominating part of their personalities. It doesn’t mean that the emotional brain goes away- it’s still out there cringing but it doesn’t have any controlling power.
Every trade ends up in one of the following:
- Small profit
- Small loss
- Big profit
- Big loss
Your job as a trader is to LOVE the first 3 (yeah, even the small losses) and make sure you never incur a big loss. As a corollary, don’t go looking for a zero-loss strategy; go looking for a strategy that has a higher success rate and that never incurs big losses.
I am waiting for the day when instead of “zero loss” people ask me about “small loss strategy”.
Subscribe to our channel Now.
FAQs
The zero loss strategy in Intraday trading is a risk management technique that aims to minimize or eliminate any potential losses in a trade . It involves setting a stop - loss order at the same price as the entry price , ensuring that the trade will be closed at breakeven if the market moves against the trade .
Is there a no loss trading strategy? ›
In reality, there is only one way to achieve no-loss Forex trading – and that's to avoid trading entirely. By nature, FX trading has always been synonymous with risks. If you are not open to the idea of sometimes taking losses, then financial trading is definitely not for you.
Is stop-loss hunting real? ›
Stop-loss hunting occurs when large market participants, such as institutional investors or powerful traders, intentionally manipulate stock prices causing temporary volatility and price movements able to trigger stop-losses placed by retail traders thus creating liquidity for their own larger trades.
How long does it take to master day trading? ›
Like any other endeavor you seek to master, you must be a good student and diligently practice daily. Not to be dismal, but only about 4% of people will make it as successful day traders. Further, it takes about six months to a year of hard work before seeing those consistent profits.
What is the best stop loss strategy? ›
Summary and conclusion - Stop-loss strategies work
The best trailing stop-loss percentage to use is either 15% or 20% If you use a pure momentum strategy a stop loss strategy can help you to completely avoid market crashes, and even earn you a small profit while the market loses 50%
What is an example of a zero-cost strategy? ›
Examples of Zero-Cost Strategy
A practical application of a zero-cost business strategy for an individual may be to improve sales prospects for a home by decluttering all the rooms, packing excess belongings into boxes, and moving the boxes to the garage. Because the labor is free, no cost is incurred.
Why do 90% of traders lose? ›
Most traders fail because they do not invest enough time and effort in learning about the markets and trading strategies. They enter the market without a proper plan or strategy, which leads them to make poor decisions and lose money. Another reason why traders lose money is because of emotional decisions.
What is the most profitable trading strategy of all time? ›
“Profit Parabolic” trading strategy based on a Moving Average. The strategy is referred to as a universal one, and it is often recommended as the best Forex strategy for consistent profits. It employs the standard MT4 indicators, EMAs (exponential moving averages), and Parabolic SAR that serves as a confirmation tool.
Does Warren Buffett use stop losses? ›
Do you think Warren Buffett, the most successful investor of all time, uses Stop Loss? Let me tell you: absolutely not!
Can brokers see your stop loss? ›
Many new traders and even traders who are in this business for years have this flawed idea that somehow your Broker hunts your SL order. So, Does your Broker hunt your stop loss? The short answer to this question is : NO, they don't!
For example, if a market maker was long Apple stock at $10 per share, and the price of Apple stock then fell to $9 per share, the market maker would be experiencing a loss. To offset this loss, the market maker might widen the spread on Apple stocks by altering the bid or ask price.
Do banks hunt stop losses? ›
And the big players such as banks, big institutions, hedge funds, etc. need liquidity. Those big players cannot just enter a trade at once, but they slowly have to build a position by “hunting for liquidity”. And stop loss orders in the markets are the best way to get liquidity.
How much money do day traders with $10,000 accounts make per day on average? ›
Assuming they make ten trades per day and taking into account the success/failure ratio, this hypothetical day trader can anticipate earning approximately $525 and only risking a loss of about $300 each day. This results in a sizeable net gain of $225 per day.
How many trades should a day trader make a day? ›
A day trader might make 100 to a few hundred trades in a day, depending on the strategy and how frequently attractive opportunities appear. With so many trades, it's important that day traders keep costs low — our online broker comparison tool can help narrow the options.
Who is the best day trader in the world? ›
Who is the most successful day trader? There are a lot of successful traders but Jesse Livermore is often regarded as the most successful day trader. His success came from trading on the capital earned by himself and by trading on setups made by himself.
What is the zero line strategy? ›
The zero-line is a trading strategy that uses the charting of the trading price of an asset to determine the entry point. The strategy uses a short-term timeframe, with two long-term Commodity Channel Index (CCI), and a single exponential moving average.
What is the zero day option trading strategy? ›
A 0DTE strategy establishes a position on the option contract's expiration day, though these option contracts may have been listed days, weeks or months ago. The option contracts could be tied to the price of indexes, exchange-traded funds (ETFs) or single stocks. Use of 0DTE option strategies is on the rise.
What is a zero cost hedge strategy? ›
'A zero-cost hedge is a way of protecting yourself from the risk of the market not going your way. But while you don't have to pay any money upfront, it's important to understand that there's still an opportunity cost.
What is the hero or zero option strategy? ›
To implement the zero-to-hero options strategy effectively, you need to follow the steps outlined below.
- Step 1: Understand the Market Conditions. ...
- Step 2: Select the Right Options Contract. ...
- Step 3: Initiate the Trade. ...
- Step 4: Decide When to Sell. ...
- Step 5: Close the Trade.
