Thursday, August 7, 2008

Cut Loss Short and Fast

In trading, cut loss short and fast is one of principles to achieve consistent and profitable results. Following this principle is one of the common attributes of successful traders, though, they might implement it in different ways.

Here are my understandings of this principle and I like to follow them consistently in my trading.
  • Always have a stop loss in place.
  • In a trading session, I enter a position but I have a loss around the close of the session. I close the position.
  • After I enter a position, I have profits for a while. Then the market stalls, goes again me, and gives me a loss. I close the position.

It seems that traders have tendency to let loss run. They are unwilling to experience feelings of loss. They hope the market can come back to their way again.

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