I am a senior citizen, 70 years old, anda long-term investor. I have never indulged in F&O and day-to-day trading.
How can I put a stop-loss in every share of my portfolio on a daily basis? My account is with a broker and any fresh investment in shares — purchase or sale — is made through a phone call.I am not fully familiar with computers and other apps, but only have a working knowledge. Please advise.
First of all, I would like to stress on something important – futures and options (F&O) carry more risk than the cash market and my advice would be to not trade in F&O given your age. Further at 70 years, the rule of thumb is to take minimum exposure to equities.
But if you are very sure of trading, I would suggest sticking to the cash segment and avoid trading F&O.
Coming to the stop-loss, it depends on whether the position you’ve taken is for short, medium or long term. It can also vary based on the chart setup of each stock in the portfolio. If you can share the stocks that you’re holding and for how long you intend to carry each of them, we can advise specifically.
That said, we can suggest a common method. But before that, you should understand Average True Range (ATR).
The greatest value of the following three will be taken as the true range: Current high minus current low; absolute value of the difference between current high and previous close; absolute value of the difference between current low and previous close. ATR is the average of the true ranges. Generally, traders consider the average of the last 14 days. ATR also shows us how volatile a stock has been recently. If the ATR is increasing, it means the stock is witnessing higher volatility and vice-versa.
ATR can be used to set up a stop-loss for any stock. For short-term positions, you can consider placing stop-loss at a price that is two times of ATR away from the current market price (CMP). For example, consider that you’re holding Reliance Industries for short-term buy at ₹2,525. The CMP is ₹2,560. Now, the daily ATR is 30. For this trade, you can keep stop-loss at ₹2,500 (2,560 minus 2*30). Keep modifying the stop-loss as and when the stock moves and the ATR changes, preferably at the end of the day.
Similarly, for medium term, 2 times weekly ATR and for long-term holdings, 2 times monthly ATR can be considered as stop-loss levels.
When you become familiar with the application, you can do it yourself or call the broker at the end of the day and ask him to place/modify stop-loss.
I have shares of Aarti Industries purchased at ₹550. Please advise for the long term. Can I accumulate?
Vaibhav Patankar
Aarti Industries (₹519.60): This stock has been in a downtrend since October 2021. However, since the beginning of 2023, the share price of Aarti Industries has largely been oscillating within the range of ₹485 and ₹570. Technically, only a breach on either side of these levels can help us predict the next leg of trend. A breakout of ₹570 can turn the outlook bullish, potentially opening the doors for a rally to ₹800. But a breach of ₹485 can result in the stock witnessing another leg of downtrend, possibly to ₹400, which is a good support.
Given the prevailing conditions, our suggestion would be not to buy more now. However, continue to hold what you have already bought. For those shares, have a stop-loss at ₹465. If the stock breaks out of ₹570, revise the stop-loss upward to ₹520. Further, when Aarti Industries’ share price surpasses ₹650, tighten the stop-loss further to ₹625. On a rally to ₹720, liquidate half of your holdings and alter the stop-loss to ₹690 for the remaining shares. Exit the rest at ₹770.
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