http://www.guerillastocktrading.com/forex-trading/why-cutting-losses-is-essential-to-a-winning-stock-trading-system Your search on information on the subject of avoiding losses in trading says to me that your brain is in the correct place. A large amount of rookie investors concentrate on materialism or in other words the reverse of risk aversion. Amateur investors think how much money they might make if only, and not about how they can lessen stock trading losses.

Can you avoid losses in stock trading? Nix that idea. My own 10 year accuracy fluctuates between 70% and 80%. Hence, 20% to 30% of my stock trades result in losses. However, there are steps you can take to reduce losses in trading.

1 – Don’t attempt to get back your losses. The worst action you can do subsequent to a loss in stock trading is to come to a decision that on your next trade you are going to make back the loss. Many amateur stock traders will put on a riskier trade in a small cap or any stock they believe can appreciate in value even more than their first losing trade with the idea that they will make back the money they lost. Do not do this. Putting on a riskier trade means you just improved your chances of having a second losing trade. Do not get gluttonous and lose all feeling of fear because of a loss. Instead look at your stock trading method. Did you stick with your stop loss plan? Did you rationalize and give reason for why you were still holding the losing stock even while your initial profit thesis was broken? Make all adjustments you need to your stock trading system then move on.

2 – Stick with your stock trading method. Stop hopping around from Stock Trading system to trading system as soon as you face a loss. No stock trading method is perfect. Continue with your trading method and make adjustments as desired but don’t leap from trading system to trading system. Become very good at a trading method before you decide to knife it. As well, do not get fearful and become too conservative.

3 – Ascertain the trend of the major indices. Use either the S&P 500 or the Nasdaq and establish the trend prior to buying or shorting a stock. The concept is to trade with the trend, not counter to it.

4 – Determine your profit thesis before you enter the stock trade. Your profit thesis should include what percentage profit you will have before you sell, and what percentage loss you will have before your sell. You ought to never risk more than you are attempting to gain. Case in point, in company ABC I’m going for a 5% to 10% gain, with a 5% stop loss. Get rid of your losing trade fast but let your winners ride.

5 – Time your entry better. I have found that when I go long a stock, if I’m up the first day of buying, my odds of it being a winning trade for me go way up. The entry is so critical that several well-known stock traders have gone as far to say that they make their money on the entry, not on the sell. In the video below, I let you see a method I use to time my entry better. Provided you have a Scottrade trading account, you will be able to employ this tool.

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