Risk management lessons from DHFL Stock

Dhfl , a quality stock with good track record  delivered phenomenal returns from 2016 to Aug. 2018. But things changed thereafter . the month of September , 2018 changed things upside down . during this month , the scrip opened at 669 , made high of 691 , then started crashing down , made a low of 252 and closed at 274 . all this happed in a time span of one month .

With the benefit of hindsight , one lesson from this episode is to have a pre determined exit level. Before entering a trade for whatever timeframe ( be it one day or 10 years ) , its important to have exit levels , analysis of risk . etc . if these things are thought beforehand , one can let the profits run , with less bothering.

Many traders/investors think that , the falling stock will rebound from these levels but 95% or more of the time , the stock price does not . again they think , this time it will rebound from such levels  , but that too doesn't happen . this fantasy goes on , until their loss becomes very huge .so its always better to have an exit level . a good trader/investor is correct about 75℅ of the time . but what turns them great is the fact , that the remaining 25% wrong trades , where exited by them  at small losses . How this can be done ? The answer is predetermined  exit levels.

Profit and loss are part of the game . pre decided exit levels , helps to minimize the loss. As the famous saying goes , heads I win , tails I don't lose much ..