| You need to learn a trading method to that minimises | | | | Selling shares is probably the most difficult decision |
| trade loss and lets your profits run. a 'stop loss' is a | | | | you will face but it is the most important. the decision |
| pre-defined level at which you will exit a position in a | | | | is especially difficult when you are faced with a loss |
| security based on the premise that it is not moving in | | | | and all you want to do is wait for the shares to |
| the direction that you had anticipated. all experienced | | | | return to your buying price. the situation is made |
| and successful traders will tell you that setting stop | | | | worse when the shares continue to move away |
| losses and then sticking to them, is absolutely | | | | from you, making your loss even greater than you |
| essential if you are going to be profitable over the | | | | would have ever imagined. |
| long term. | | | | There are a number of reasons why people will not |
| Whilst trading routinely involves decision making, | | | | sell shares when they are faced with a loss. this |
| there are no more important decisions you have to | | | | potentially is a problem because there will be many |
| make than when to sell shares. many traders often | | | | occasions when a trade they enter does not head in |
| overlook this part of trading or underestimate how | | | | the anticipated direction. the time tested rule of |
| important that it is. it is selling that impacts directly on | | | | 'cutting your losses' would be most applicable |
| whether or not you make any money trading in the | | | | however for those who have strong self-confidence |
| sharemarket, as buying shares is simply a means of | | | | may find it difficult to close the trade at a loss |
| putting yourself in a position to make money trading. | | | | because doing so acknowledges that they got the |
| One of the things that separates successful traders | | | | trade wrong in their own minds. this may be a |
| from the majority of market participants is that they | | | | difficult situation to digest so the easier option will |
| have a detailed plan that guides them when to close | | | | often be to not close the trade at a loss and |
| trades. for them, this is essential. it is fair to say that | | | | therefore violate probably one of the most important |
| when a lot of traders buy shares they have little idea | | | | trading rules there are. to most traders, the idea of |
| of under what conditions they would consider selling. | | | | not closing a trade at a loss means that they haven't |
| it would also be fair to say that a fair percentage of | | | | had a loss despite the fact that they may have a |
| market participants routinely adopt a 'buy and hold' | | | | large unrealised loss. |
| approach. | | | | Unfortunately for many traders, they cannot bring |
| When it comes to considering your strategy for | | | | themselves to set stop losses or if they do, they fail |
| exiting, what is important is not the manner in which | | | | to adhere to them. |
| you decide to exit, but the fact that you have a plan | | | | Cutting your losses is one of the most important |
| in place to advise you when to exit. what is also | | | | trading rules there is. if you fail to cut your losses, |
| important is that you remain consistent in whatever | | | | you are most likely going to be worse off for it. |
| approach to exiting you adopt. | | | | employ a trading method that ensures this. |