Because there is a limit on the pain one can take. Every investment/trading plan should have an exit plan so that you don't get married to bad investment.
Let me share one illustration -
Here's KPIT stock daily Chart
KPIT stock was doing great till March 2015. It was nicely holding above 200 dma and then suddenly the stock cracked below 200 dma. And what happened after that was relentless selling. A 180-200 INR stock is now trading below 90 INR. The stock chart is a text book example of why one should have an exit plan to avoid such disaster in portfolio. Hope is not a great strategy if stock cracks below important support levels.
Please share your comments on what you think of above stock observations
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers