Understanding 💰 Bankroll Management

The key to #daytrading is 💰 BANKROLL MANAGEMENT! As a trader your number one job is to manage risk. Your max loss on any trade should never be more than 10%. The more you lose, the more you must make to back to get back to break-even point. The grid below shows you why we never want to lose more than 10% on a single trade.

The following chart exhibits the challenge of making your investment back after you lose it. Notice that the more you lose, the amount needed to break even grows exponentially. This is because the money lost is capital that is no longer available for investment. If you lose only 10%, you still have 90% of your capital available for investment. If you lose 50% you only have 50% of your capital available for investment, so a 100% gain is required to get back to break even.

All Day Traders & Swing Investors need to have a capital preservation plan that includes controlling investment losses. Many in the financial industry will tell you to place stops on your individual stocks. But is it possible they recommend this because it creates more trading and therefore more commissions? Why should you sell a stock when it goes down? If the company’s prospects haven’t changed maybe you should buy more not sell at a loss. What if you used a tactical asset allocation to minimize investment loss and buy more stocks when they are bargains?More on Scaling Techniques will be covered in the next lesson ...stay tuned and thanks for reading...Good Luck Trading

Why It's So Important to Avoid Investment Losses?

Instead of putting stop losses on individual investments, develop an asset allocation for your portfolio that controls your investment losses. Most investors invest too aggressively; they have been taught an outdated buy and hold strategy that forces them to sell in bear markets because they get to the point where they can’t stand the pain of a bear market anymore, and they sell at the wrong time.

Investment Losses and Risk Management

When you experience large losses day trading or swing trading you have less to invest and then your portfolio is in a position that will probably take years to get back to break even. The reality of break-even loss analysis makes losing 50% of your money intolerable! Even if the market gained 10% per year, and you were 100% invested, it would take 7 years (7 instead of 10 because of compounding) to get back to break even. This is unacceptable. You need to invest in a way that allows you to buy low and sell high, not the opposite.

Today's MOJO show ... watch how we nailed this CBLI trade:

Featured Posts
Recent Posts
Search By Tags
Follow Us
  • Facebook Basic Square
  • Twitter Basic Square

Stay Connected

Disclaimer: MOJO Day Trading is a provider of stock market entertainment and education. MOJO Day Trading is not a registered as an investment adviser either with the U.S. Securities and Exchange Commission or any other federal, governmental or regulatory authority. The business services and activities of MOJO Day Trading do not requires any such registrations. You understand and acknowledge that there is a very high degree of risk involved in trading securities. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented are for educational purposes only. Such picks, alerts, set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.

Please note: Hypothetical computer simulated performance results are believed to be accurately presented. However, they are not guaranteed as to accuracy or completeness and are subject to change without any notice. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Since, also, the trades have not actually been executed; the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commissions. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown. All investments and trades carry risks.

While MOJO Day Trading accepts payment to publish press releases, sponsored videos and articles, we do not endorse and cannot guarantee any claims made in those content pieces. None of the content published on MOJO Day Trading should be construed as investment advice. We strongly advise our readers to always do their due diligence before investing in any stock, futures, cryptocurrency, blockchain project, or ICO, particularly those that guarantee profits. Furthermore, MOJO Day Trading does not guarantee or imply that the stocks or cryptocurrencies or projects published are legal in any specific reader’s location. It is the reader’s responsibility to know the laws regarding stocks, cryptocurrencies and ICOs in his or her country.

Copyright (c) MOJO Day Trading, LLC. 2012-2021. All Rights Reserved. No part of this website, videos or any of its contents may be reproduced, copied, modified or adapted.