A big win can take care of many small losses and a big loss can wipe out many small wins. It all boils down to money management, following some trading rules, and being disciplined. Enter a trade put on a stop loss take a small loss. -$8 Enter a trade put on a stop loss take some profit. $15 Enter a trade put on a stop loss take a small loss. -$5 Enter a trade put on a stop loss take a small loss. -$10 Enter a trade put on a stop loss take some profit. $4 Enter a trade put on a stop loss take some profit. $7 Enter a trade put on a stop loss take a big profit. $75 Enter a trade put on a stop loss take a small loss. -$15 Enter a trade put on a stop loss take a small loss. -$12 Net profit 5 losses 4 wins $51 Now change all the wins to losses and losses to wins and you have a negative ($51). Enter a trade put on a stop loss take some profit.. $8 Enter a trade put on a stop loss take a small loss. -$15 Enter a trade put on a stop loss take some profit.. $5 Enter a trade put on a stop loss take some profit. $10 Enter a trade put on a stop loss take a small loss. -$4 Enter a trade put on a stop loss take a small loss. -$7 Enter a trade put on a stop loss take a small loss. -$75 Enter a trade put on a stop loss take some profit. $15 Enter a trade put on a stop loss take some profit. $12 Net profit 4 losses 5 wins -$51 If you hadn’t taken the large loss you would be ok. What if you had only taken a $20 loss instead of a $75 loss how much would you have? You would have a $4 profit for the trades taken. Big losses prevent you from having a winning day. They wipe out too many small winners that you have worked so hard to get. Big losses also take their toll on you from a psychological and emotional standpoint. It takes a long time to get your confidence back after taking a big loss on a trade.
