Dont Lose All Your Money

That sounds like good advice doesn't it? Don't lose all your money.

After all what is an investor without funds in the brokerage account? Hint: BROKE!

On the subject of investing, this means getting out of a trade when it goes against you. Don't lose all your money. This is the MOST important thing any investor can do. Cut your losses before you're broke. It's easy to do, but some investors find it hard to implement. Don't become so attached to your buying decision that you ignore this advice.

Set a stop loss figure on every stock or investment you have. Decide on how much you are willing to lose before you buy. All brokerage accounts have a way to set a stop loss. You can do this right in your account so that it's triggered automatically.

Use an actual price or a percentage. Take the time to learn how to set up a stop loss order or trailing stop in your particular brokerage account. Or if you have the time and stick-with-it-ness to monitor your account on a regular basis (like all the time), keep track of where prices are mentally.

Here is an interesting chart that shows how much an investment has to go BACK up for you to get all your money out.

Take a look at this...

If the price per share goes down 10% - the stock has to go back up 11% for you to get back to even. Not convinced yet?

...down 20% - the stock has to go back up 25%.
...down 25% - the stock has to go back up 33%.
...down 50% - the stock has to go back up 100%.
...down 75% - the stock has to go back up 300%.
...down 90% - the stock has to go back up 900%.

Looking at this would suggest you are gambling if you set a stop loss at more than 25%.

Bottom line is, don't fight the trend and the hard reality of numbers - Use a stop loss to get out of any investment that goes bad. Don't lose all your money!

Tom Donaldson shares his investing experiences on his Panglossian Investor Blog and invites you to join the Panglossian Investor discussion group.

---

Long-Term Investment In Todays Market?

The stock market is very unstable at this time going... Read More

On Line Stock Trading: Small Cap & Micro Stocks Go Up and Down - How Can You Profit?

Success in small cap & micro cap stock trading like... Read More

Pathways

During our travel down life's path we come to many... Read More

Stock Market Investments

If there is one term over-used when talking about making... Read More

Stock Trading Diversification

This is the continuing story of our two imaginary traders,... Read More

Adding Funds

Someday you may want to retire and continue to live... Read More

Option Trading Basics

Options trading can increase the profits you make when trading... Read More

Bull or Bear?

Cat or dog? Maybe Zebra. Shucks, I don't know, but... Read More

A Common Misconception about Stock Prices

I cringe every time I hear a novice investor tell... Read More

Small-Cap Stocks: The Beginning of the Journey

When an individual investor wants to roll up his sleeves... Read More

Valuation

Every day I hear from the "experts" on CNBC-TV and... Read More

Stock and Fund Dividends

When is a dividend not a dividend?The latest thing "conservative"... Read More

What Are You Waiting For?

Do you own any mutual funds? In an IRA or... Read More

The Secret Art of Backtesting

If you have not back tested your trading system, you... Read More

How Much Money Can I Make With Trading? What Account Size Do I Need To Start?

What account size do I need?How much money can I... Read More

A Personal Stock Market Investment Philosophy

∙ Make every investment in the stock market a long-term... Read More

Parachute Investing

Ever jumped out of an airplane? It's OK if you... Read More

Paddle Your Canoe

At some time in your life you have been on... Read More

Trading Systems

To become a successful trader you must have some kind... Read More

Your Job

There are so many kinds of work that needs to... Read More

Stocks Options Trading

Let's assume that you want to make some serious money... Read More

Look Out The Window

Quick, look out the window. It's raining. No, the sun's... Read More

Price Targets

Every day in any financial publication you will find the... Read More

Market Timing?

The recent criminal fiasco in the mutual fund industry is... Read More

Dividend Reinvestment Plans: Investing on Automatic Pilot

If you're like many investors who squander those small dividend... Read More

Index Fund Trading Using Technical Analysis and Swing Trading Strategies

Index Fund Trading can be one of the most profitable...or... Read More

Never Fall In Love!

Recently I watched my favorite football team lose a vital... Read More

Advantages and Disadvantages of Mutual Funds

Outlined below are some of the advantages and disadvantages of... Read More

Stealth Bull

If you have been watching the stock market at all... Read More

Mutual Funds are Dead

You may have wondered why your mutual funds have been... Read More

Again With the Bubbles?

A few years back ? it seems like an eternity... Read More

Overvalued & Underbought

With all the bad news that has been dumped upon... Read More

Historical Briefing: Stocks, Finance and Money

The World Bank claims that some two billion of the... Read More