Rule of Thumb on How Much Loss to Take
I was presented with the following question from a visitor to Ctabs.
“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.
More you might like
What Do Candlestick Patterns Indicate?
This article covers what candlestick patterns indicate as it applies to trading decisions.
State of the Economy and the Stock Market Outlook
This article examines the state of the stock markets as economic conditions transpired over the past year and how to deal with the outlook for recovery.
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).
Trading Gold Stocks in 2009
This article examines various elements of importance for trading gold stocks.
Comparing Day Trading with Other Trading Timeframes (March/2009)
This article covers my day trading experiences in the month of March/2009. Different trading timeframes are compared.
