Rule of Thumb on How Much Loss to Take

I was presented with the following question from a visitor to my site.

“I like to trade the overall market (QQQQ). Is there a rule of thumb on how much loss to take before I sell a losing position? I'm always scared if I pull the trigger and bite the bullet, as soon as I get out, the market will rally but if I don't, I'll sit on it until I have lost a few thousand dollars. It's frustrating at times.”

My conclusion statements follow.

This is not intended to be flippant, but the amount of loss to take is the amount of loss you should take according to your technical analysis system. The Ctabs method/system inherently provides you with loss guidelines through its exit points. And if you additionally use a 10% stop-loss (as a general rule of thumb, broadly speaking), then you should be sufficiently covered.

I know this may not sound entirely clear as to precisely how much loss to take. Perhaps the best notion to hang onto is the fact that if one stays on trend, follows the Ctabs buy/sell signals and has a stop-loss put in place to catch the big and sudden drop, trading success will improve which means there will be net gain.

If the markets are extremely volatile, then you will get caught in the volatility. However, trading an index such as QQQQ should make it less volatile relative to individual stocks.

Comments are for informational purpose only and do not constitute stock trading recommendations.

More you might like

Trading Gold Stocks in 2009

This article examines various elements of importance for trading gold stocks.

Stock Market Day Trading Experiences

This article covers day trading experiences examining what works and what doesn’t work. Many similarities exist between day-trading and short-term inter-day trading.

IBM Acquisition of Sun Microsystems - Trading JAVA

This article covers the reported IBM acquisition of Sun Microsystems. On the stock trading side, there are some interesting points to discuss.

From Long-Term Investing to Short-Term Trading – How to Profit on the Stock Price Rise and Drop

This article presents the notion of migrating from a long-term buy-and-hold investing strategy to a short-term profit-making trading style, capitalizing on the rise and drop of the stock price (following the trend and profiting on the cycles).

Paper Trading Preparation for Real Trading

This article covers the topic of paper trading as preparation for trading with real money. Failure in paper trading is a sign that the person should not partake in real trading. Success in paper trading does not necessarily mean a person will succeed in real trading.



Visit igtsoft.com for
your photography needs.

Important Matter



It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so. - Mark Twain