Financial market participants can talk all day about indicators, charts, trading setups and execution times all of which are important to trading stocks effectively. However, the one area most often overlooked or ignored by undisciplined traders is money management or the protection of trading capital. Traders spend hours learning trading techniques and methods like day trading, swing trading or even scalp trading, but very little time is spent developing a trading system designed to protect capital. Unfortunately the emotion of greed is often the culprit which causes traders to overlook this important element of successful trading.
Experienced traders know they have to protect their capital at all cost and have learned to control losses effectively. In fact, before learning to trade for profit, a new trader would be better served by learning how to control losses. Losses are every bit a part of trading as winning trades and many traders have more losses then they do successful trades. But they have learned to cut their losses short and let their winning trades run. If you can learn to control losses and remove the emotional element from your trading, you are on your way to becoming a successful stock trader.