There is no way that you can completely avoid stock losses. If you imagine to one day have a thriving trading profession, you have to accept and prepare for the eventuality of losing in a couple of trades. There is nothing negative about doing so. This is just how trading is and you need to work around this fact.

It is perhaps because of the reality of losing that makes investors extremely eager to regain what they’ve had to let go. This is one reason why they become obsessed over finding perfect indicators and systems that will give them numerous wins. What they should realize though is that their main objective should be to survive and not merely to increase their number of wins.

There is a sensible explanation as to why it is more vital to survive investment losses. If you don’t struggle to stay in the market, you run the risk of losing your entire trading float and getting barred completely. What this ultimately means is that you will have no money left to use for trades that offer potentials for profit. It is therefore no longer the frequency of wins that matter most but the ability to stay on the playing field.

One way to help you make sure you don’t get ejected early on is to set a specific percentage for your maximum loss. Doing so will remind you of the exact degree or magnitude of stock loss that is bearable for you. With a figure set in stone, there is no danger that you will have to let go of everything all at once before you are even given the chance to make initial profits.

There is no uniform limit that you can use in trading. Many expert traders though, usually settle for no more than 1% of their floats as loss limits. This however, is a percentage that is simply too tight, resulting in profits that are also tight. You might find it better for you to go for a loss limit of 2%. This can help protect you from losses while at the same time offering better profit opportunities.

What is especially beneficial about setting limits for your stock losses is that you make it nearly impossible for you to come out as a complete loser. With the 2% limit, it can take an absurdly long string of defeats before you are able to erode your float entirely. This is because every single loss is computed based on the current available float and not on the initial float that you set up when you started trading. The smaller your float gets, the smaller your maximum loss figure.

Naturally, identifying how much you can let go of is not the end of the story. You will be able to put yourself in the best position to survive losses if you pour some attention into the other components of a money management plan. This means you also need to set your initial stops and your exact trading capital.

You should not allow investment losses to ruin your chances of trading success. Although it’s not possible to get absolute protection, you can still do something to make sure losses don’t destroy you. Create your money management plans now to make sure you never lose too much.

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