Playing the stock market game also means dealing with losses. We all invest hard earned money into stocks because we want to make profit. But only those of us who are able to master their loosing trades will succeed at the end.
A big beginner mistake is to focus on profits and not on losses. Loosing trades are part of the game. Even the best stock trader in the world has loosing trades from time to time.
We can not survive in the stock market when we do not have a plan for our loosing trades. There is a smart but hard to follow rule which says: Cut your losses but let you profits run. This is truly the art of making money in the stock market.
When you are honest with yourself and analyze your past trades then you will probably admit that you did the exact opposite of that rule often enough. We all held an investment in a stock that went lower and lower and we did nothing to stop the loss. We were hoping that the stock bottoms and goes up again.
Cutting losses sounds easy on paper and it makes totally sense, but it is something we can hardly do when we are in a trade. You may know already why. Your emotions win the battle and you forget all your plans. When in a trade you are greedy when the stock goes up, you are hoping and praying. When it does not move then you are starting to get worried, you question yourself and your trading plan, something must be wrong. When the stock goes down you are not willing to admit your failure.
Being a master stock trader means being a master of self control. If I had to choose between a trader who knows everything about the stock market and a trader who knows nothing but is able to follow a simple trading plan without emotions, I would bet all my money on the second trader.
It is that important. Think about it. Master your losses and your profits will explode.
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David A. Sorenger is an expert author on stock market related topics. His articles about stock trading, online stock brokers, stock options and penny stocks have been published on numerous web sites, forums, blogs and e-zines all over the Internet.
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