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THE MARKET WHISPERER 38 7

change in the stock’s direction. They deny the truth and seek to justify the
situation in which they are caught with any excuse possible: “The company
has good products,” or “It’s got top management,” and so on.

In my view, the stop can move only in one direction, and that is NOT
towards increasing a loss. As explained in the section dealing with trade
management, after realizing the first profit, the stop can be moved as close
as possible to the entry point or above it, in order to prevent a profitable
trade from becoming a failed one.

Repeat this in your mind until it becomes embedded: We never give
money back to the market. This is one of the stock trader’s most basic
rules, although for most, it will take a great deal of time to learn and
understand it.

The Importance of the Stop

Over time, I learned that the main error enacted by failed traders was
the difficulty in cutting losses on time. Your main resource is the capital

you deposited in your account. If you do not do everything possible to

preserve it, you are doomed to a complete wipeout. “Everything possible”

means ensuring losses are as minimal as possible. Always.Without any

allowances or excuses. Without “just this once,” and without, “I’m just

testing…” Without “I trust myself, I know what I’m doing,” or “I’m prepared
to pay the market for my education.” Small losses. First and foremost, play
correctly from the defensive position. Always.

SMART A better trader is not necessarily one who chooses the right
MONEY stocks, but one who knows how to cut losses faster than
everyone else.

Loss is an inseparable part of stock trading. In fact, many professional
traders lose on about half the trades they execute. The significant difference
between a failed trader and a pro is the ability to cut losses on time, but
not exit a stock too quickly when it is moving in the right direction. When
professional traders lose, they immediately admit their error, cut their
losses and move onto the next trade. They do not comfort themselves with
excuses or justify their loss with statements such as, “but the stock shows
good earnings,” or “the market is trending up, so the stock will no doubt
reverse.” All these actions start with loss and end with lamentations.