Stop Loss

Trade exits can be just as important , if not more important , than trade entries. Learning to love to take loss is an absolute necessity if you were to be successful in the trading market. Basically you need to reach a psychological stage whereby losses should not bother you much , so long as you act fast to be out of the market when the trade no longer represent a profitable opportunity. No one is going to be happy to have a losing trade , but you should be happy to be able to minimize loss before it ruin your capital.

Many traders learn this the hard way. They end up losing their trading account before they realize the importance of preserving capital and the concept of stop loss.

Just like a trade entry , the window of opportunity is rather narrow for trade exit too. Once you confront the possibility of being wrong , and when it is time to cut losses , there should be no hesitation. If you find yourself considering , weighing or judging , then you are either not predefining what a loss is or you are not executing them immediately upon perception that your trade has gone wrong. In any case when this hesitation did turn around and make your trade profitable , then you are reinforcing an inappropriate behavior that will inevitably lead to disaster eventually. Either way you lose.

We need to accept the fact that losing is part of the trading game. The sooner you get out of a losing trade , the faster you can look forward to the next opportunity to find a winning trade. This is easier said than done ; many traders have trouble getting out of a losing trade because they think losing trade is a reflection of themselves. Trading is all about risk reward ratio so long as losses are smaller and less frequent than winners , end of the day you are a Winner !