When I look back on all my biggest losing trades from past years, I either risked way too much on an initial buy, averaged my losers, or didn't plan an exit before an entry...or worse, did all three together.
Baby Steps Toward Success:
Planning for an exit before an entry will save your butt.
Shown below are some stocks that could have hurt investors/traders in the past years. However, with prudent initial risk, and a predetermined exit, participants would have side-stepped disaster.
While trading individual stocks, I believe there is no need to let falling prices unnecessarily corrode capital. I'd prefer to exit a position with a small loss than a huge loss.
Novice players often say to themselves: “I’ll sell when it gets back to even.” Even may never come. Or worse--they will buy more stock as prices go down, because if it was good at $70, it has to be great at $50, and even better at $30--š¬ Quick path to large losses.
Now the important question is, “How do I determine my exit strategy before I buy?” If you are pondering this question, you are on the right path.
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