A Dollar Saved is as Good as a Dollar Earned!

By Kenneth Robson on June 14, 2012 • ( 0 )

Good trading decisions often need to be counter-intuitive. Novice investors/traders frequently find it almost impossible to take a timely loss when the price falls below entry. The intuitive response is to maintain long positions thinking that that the share price will soon rebound. The bettter decision is to set a stop loss position when the trade is entered and to take the loss promptly withouit recrimination.

Consider the benefits of such an action. Capital is conserved for reinvestmemt at a lower entry price. The same security can be chosen if it is likely to prove profitable in the longer term, or another with better prospects selected instead. The difficulty is in being sufficiently patient to optimize the next entry.

Instead of being a losing failure, the stop-loss sale can be regarded in a positive light as part of a longer term winning trade.