InvestorQ : What factors should a trader consider while monitoring trading positions?
Nishant Chandani made post

What factors should a trader consider while monitoring trading positions?

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Ria Roy answered.
2 years ago

Monitoring from a Short-Term Traders perspective can be equally complex. Here are some of the key factors and parameters that should be considered while you monitor your open positions in trading.
Has the stop-loss been hit and should I trigger the stop loss? This is a trade-off when you can wait a little longer. But do remember that in the guise of delaying stop losses you must not end up adding to your risk or averaging your positions.
Although the profit target is yet to be reached, can I book partial profits? That is a judgment you need to make based on whether the markets are volatile or not. In stable markets, you don’t need to worry but in volatile markets, keep taking profits at regular intervals instead of waiting for the full hog.
Having achieved profit targets, should I exit or hold on with rolling stop loss? This is a question you will have to answer based on your assessment of the prospects of the stock. Trailing stop loss or rolling stop loss is a method of constantly tweaking and revising your stop loss upwards so that you don’t lose out on price appreciation and at the same time have your downside risk protected.
Is the market too volatile for overnight risk? In that case, you need to stick to intraday positions only. No point in taking an overnight risk when you know that either Trump will declare a trade war or there is an important Fed meeting coming up.
Is it better to close out trading positions ahead of the credit policy/budget etc? It is always better and you can take a fresh view later. Of course, you may miss out the volatility dividends but rather save your capital than ride every trend in the market.
What is the worst case loss that can happen if the Nifty falls by 5%? This is called stress testing and you need to ensure that you can have this picture at any point of time. We are not even talking about black swan events because 5% correction can happen even on normal days. But you need a Plan-B for such situations.
Do I have sufficient capital and capacity to take that kind of a loss? Have a loss monitoring mechanism for each trade, for each day, for each week and for your capital overall. When that level is breached just close and sit on the sidelines and get back to your drawing board.