Two Types of Investors

There are two types of investors those who will cut their losses and those who will not.

Unfortunately, the never cut losses investor is the most common.

Here's what happens.

Whatever stock or sector that is hot. The sector is, unfortunately, usually too popular by this point to be a great investment. These trades can be lucrative by using a secret to investing: trailing stop losses.

Without an exit strategy investors typically ride investments, whether stocks, bonds, cryptos, etc, down to huge losses. They even tend to compound the problem by continuing to add to declining investments.

The smart professional investor actually has a plan by naming the price you'll sell any given investment. You don't let the market convince you to stay with any given investment. The market can be irrational for a lot longer than you can be solvent.

Great investors know:

Losses are part of the game. If the losses are small, they don't matter. Small losses aren't failures. They are victories – victories against big losses. And big losses have to be avoided at all costs. Nobody can survive a big loss.

Manage your risk today by defining the amount of money you can loss on each investment. First decide the dollar amount you are willing to loss. This determines the investment size.

For example: If I am willing to loss $1,000 in XYZ and I want to use a 25% trailing stop loss. My maximum initial investment would be $4,000.