I've heard it said that all stock traders make losses. They can't tell when that will happen but when it does, it never does come as a surprise [and they cut their losses swiftly before they lose more of their money]. That's probably what scares off most people. If they'll lose the money they'll invest . . . For those new to stock trading, how much do you think they should be prepared to lose while they learn how to trade? 10% of the money they invest? Or maybe a little more?
"Gimme guys who are poor, smart and hungry. And no feelings. You win some, you lose some, but you keep on fighting . . . and if you need a friend, get a dog."—Gordon Gekko, Wall Street Sorry, couldn't resist. To answer the question, though, yes, losses happen. No one likes taking them, but it is part of the game. The goal is to come out ahead despite said. As to how much loss one is willing to take, that is going to be subject to a lot of personal factors. Some are willing to take series risk and can wait, others less so. I don't believe that there is a one size fits all answer to that.
I admit that I am not well versed with stock trading. When a nephew was working in the Philippine Stock Exchange, he used to tell me that losses are inevitable for beginners because the stock market is partly a gamble. He explained how the speculation works at times and how it doesn't work sometimes. And since the risk is there, that's what scares me. For now, I have in my hand some company shares of stocks that I cannot sell due to the holding period. But after some 3 years, I would probably sell it.
Yes, making losses is inevitable, but like you say, there it goes the smart expression, cutting losses. When we know how to cut losses and we maximize what we earn that's when we start making money.
You'll be lucky to be right much more than 50% of the time when doing day trades. Your odds are likely quite a bit better with longer term investing in good companies. But some unrealized short term losses are unavoidable. You'll always have the occasional mid to longterm realized losses here and there, and perhaps even the occasional company that gets bought out at a lower price than you bought it for, or that goes bankrupt or whatever. Losses are inevitable.
You should be prepared to lose your entire investment. Bankroll management 101: Never invest/gamble/bet more than you can afford to lose. And like all things that have some risk to it, you will lose at some point in your trading career. Use it as a learning tool and how you can give yourself an edge. Stick to a strategy and think about making money in the long-term (several years) rather than just a few months. If you get caught up in short-term losses and start chasing those losses, you will go broke.
