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Originally Posted by scho63
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I didn't have time the rest of the day to post but just adding to this discussion and why risk management is so important. Here's an easy example.
Let's say I am trading with $100k account. Since my rule is 10% position size, I put $10k on a stock I think will breakout but instead gaps down and I get stopped out at 10% loss. A 10% loss of $10k is $1k. And $1k is only 1% of my total account value. I bet everyone here has seen their account value drop much greater than that on any random day. A 10% loss sounds severe but at only 1% of my total account value (due to position sizing), it's something I can live with and regain rather quickly.
I hope that makes is clear why I am such a stickler for keeping your average losses small. Maintain capital so you can find another stock to trade because there's always something to move that money to if your stock screening/rules are working. The only thing you can't do is make money if your capital is depreciating.