This is one of the fundamental tenants of a solid stock market education. If you’ve read any of my writing, you will see this theme over and over again. I always feel like I’m banging on about it, but the message seems to be extremely difficult for many people to take on board.
Controlling losses is without doubt the hardest discipline for investors and traders to master…and it’s the one part of a traders education that delivers outstanding results above all others. It’s also the number one reason why new traders and investors go broke…and it’s totally avoidable!
All sorts of emotions take over when we should be selling…fear, hope, greed and wishful thinking are often prevalent when it’s time to sell. If you ever catch yourself in one of these emotional states, rise above yourself and look at your true emotions from the outside. Develop the third eye…be the witness. Are you wishing, hoping or feeling greedy? When you recognize these emotions, you can react with calmness and conviction.
We are emotional beings and this comes to the fore in trading with many new traders. The results are usually not what we would wish for when our emotions get triggered. When I see my emotional switch get thrown, I normally sell immediately because I’m not thinking clearly or dispassionately. There’s no shame in taking a step back and a few days off to see what’s going on inside you. It’s a sign of strength, not weakness.
If you can’t take small losses, you are doomed. If you never allow small losses to grow into big losses…guess what? You’ll never suffer a big loss!
We are always complicit in our big losses. Almost always, they can be avoided through buying at the right time with proper risk control and stop losses. This is laid out for you in baby steps in the stock market code manuscript. It’s a key part of mastering the stock market basics. If you have a problem with accepting or cutting losses, you will find the answers you need here.
Tags: stock market basics, stock market education, stock trading basics, stock trading education