Keep losses small in order to avoid huge losses

By | January 19, 2016

Keeping losses small in order to avoid huge losses

Why is that so?

From a psychological point of view nobody wants to lose be it stock market or in any situation of life. No One want to admit He/She has done a mistake and termed as a loser. That’s why most people prefer sticking to a losing position, till they are forced to exit as margin pressure increases. They don’t want to be labeled a loser. So they start hoping their position will turn around and end up being a huge winner. The stock then keeps tanking. Then they hope they will be able to sell for a break even. The stock then goes down even more. That’s when being objective and balanced isn’t possible anymore. Losses have become huge and they are trapped.

The cost is simply huge. You lost money. You lost time. There’s an opportunity cost as well as during that time other stocks would have made you a profit. You lost huge amounts of energy as you couldn’t get this stock out of your mind.

Quint Tatro:

When a position is getting ready to stop you out at a loss, do you find yourself bargaining with the name? Do you find your frustration level rising? Do you justify the reason for the move against you, and give it a little more room, only to get stopped out at a bigger loss? Or even worse, perhaps you now find yourself sitting on a double-digit loss, and are frozen with what to do with this now sinking ship?

And perhaps the biggest fear for a trader is closing out a position only to see it run back in their favor moments later. Trust me when I say that every trader, seasoned or not, has these moments when stop levels are hit and they hesitate with pulling the trigger.

How to avoid this Follow the below 3 Points

Keep Your Cool

“Deciding when to cut your losses is one of the toughest decisions for anyone to make, but traders at the top of their game know that they always have to make the decisions they need to make, which may or may not be the ones they want to make” Always Love your SL and cut your position dispassionatly as soon as you see it hitting your SL

 Get Comfortable With Being Uncomfortable

Profitable Trading Journey starts when you start live an uncomfortable life.

“In the trading world, you will either make money or lose money on any given trade. All that matters in the end is making more money when you’re right than you lose when you’re wrong.  Knowing this, traders have learned to accept failure as part of the game, but they also use the information they acquire from their mistakes as a learning tool.  Frequently, what they learn from losing money is more valuable than what they learn when they make money”

Make Yourself Accountable

“Commitment, perseverance, and discipline are the characteristics that move people beyond desire to action, that differentiate mediocrity from greatness, and that separate greatness from superstardom”

Avoid huge losses at all cost. Avoid thin

5 thoughts on “Keep losses small in order to avoid huge losses

  1. RAJMOHAN

    LET US MAKE PROFIT AS OUR FRIEND AND WORK WITH THAT OBJECTIVE

  2. RAJMOHAN

    WE CAN LOOSE FEW BATTLES BUT SHOULD WIN THE WAR
    WE CAN LOOSE FEW MATCHES BUT SHOULD WIN THE SERIES

    IF OUR LOSS IS LIMITED AND WITHIN OUR TRADING PLAN WE ARE TRADERS
    IF OUR LOSS IS BIG AND UNEXPECTED, THE WE ARE GAMBLING

  3. John

    I was a day trader during 1990 s. My guru told me,Profit is like thief, catch it when you can, but Loss is always with you.

  4. Sunil Chhabra

    Sir Just Great. These are the great words. Though I might be copying someone but for traders, there should be four outcomes of any trade – 1. Normal profit 2. Good profit 3. Normal Loss 4. Break even exit But a BIG NO to BIG LOSS

Leave a Reply