Is this a really secret of Stock Market?

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Is this a really secret of Stock Market?

Postby mark04 » Tue Oct 13, 2009 8:22 am

Dear Fellow Traders,

Everyone related to Stock Market is always focused on the goal of how much they can make buying/selling a stock, they forget to concern themselves with how much they risk loosing. Is it true that “The secret to great wealth in the stock market, is not big gains; its small losses”

Is this a strategy of keeping losses small? If we will win only 1 out of 3 times with our losers loosing 5% and our winners gaining 25% we can make extremely large profits. That’s do the math assuming that there is only 1 out of 3 winners. So if we make 9 trades of USD10,000 each in one month it means we will loose money on 6 and make money only 3. the 6 losers will cost us USD3000 (6*5% loss on each of USD 10,000 Trades) and the 3 winners will net us USD7500 (3*25% gain on each of USD 10,000 Trades) for a profit of USD 4,500

Regards
Mark
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Re: Is this a really secret of Stock Market?

Postby Edward Revy » Tue Oct 20, 2009 10:56 am

Hi Mark,
I can only quote that wisdom:

“The secret to great wealth in the stock market, is not big gains; its small losses”

Same applies to Forex. No matter how good your trading system is, eventually sooner or later there will be time when it'll be tested for the proper Loss management. Those who overlooked the issue will find themselves in a bitter situation when suddenly trading become very costly and losses start quickly eat up hard earned profits.

Regards,
Edward
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