Why Cutting Losses Early Saves Your Trading Year

00:00 - Stops are a must. I mean, we all have to use 
stops. Now, I personally rarely use hard stops,   but I have mental stops on every position that I 
take. Basically, if something’s breaking support   or resistance, I usually just exit that trade. And 
I think most of us here need to have a mental idea   in our head of where we’re going to exit a trade, 
you know, based on where it goes against us. How many of us here have ever been in a 
losing trade and we’re down something small,  
00:24 - maybe $5,000, and we think, “I’m 
not going to cut it. I feel like   this is going to be a winner,” and 
we add to that trade? An hour later,   we’re down $20,000 to $30,000. I mean, 
wow it’s hard, I can’t cut it now. We hold it till the afternoon. Maybe tomorrow 
gaps up, and we’re down $70,000, $80,000,   $100,000. We think, “What the heck just 
happened?” I mean, I could have cut that  
00:42 - loss yesterday for $3,000, $4,000, $5,000. Now 
I’ve given up 10%, maybe 20%, of my year just   by being stubborn. Think about how much more 
money we could make at the end of the year. If we just stick to some simple rules and 
cut our losses at an appropriate place.